Ellie Mosk, CEO of X-Space Industries, decided to expand the company's product offering beyond the core model rocket business. After investigation, she decided to set up a separate division to design and manufacture products for the drone market. Several companies were interested in having X-Space develop these drones, and financial results, to date, have been encouraging. Revenue was $4 million, gross margins have been running about 40%, and the customer sales and support costs were $1 million. However, there is a growing concern that some customers require a disproportionate share ofthe sales and support resources, and the true profitability of the customers is unknown. Data were collected to support an analysis of customer protability: Activity Cost Driver Total Cost Sales visits Sales visit days $ 484,000 Product modifications Number of modifications 262,000 Phone calls Number of minutes 92,200 E-mail/electronic communications Number of communications 164,000 $1,002,200 I Visit Phone Electronic Customer Revenue Gross Profit Days Modifications Minutes Communications A $ 398,000 $ 148,000 15 15 1,050 625 B 498,000 198,000 25 15 1,140 875 C 598,000 228,000 40 40 1,390 1,020 D 1,020,000 418,000 90 60 1,740 2,020 E 1,480,000 588,000 100 70 2,140 2,270 Totals $3,994,000 $1,580,000 270 200 7,460 6,810 ' Required: 1. Management felt the easiest way to allocate the sales and support costs was based on the total revenue. Using total revenue as the allocation base, determine the profitability of each of the five customers. 2. Management felt that because the data revealed some customers require a disproportionate share of sales and support resources, activitybased costing should be used to determine customer protability. Use ABC to prepare a customer profitability analysis. Required: 1. Management felt the easiest way to allocate the sales and support costs was based on the total revenue. Using total revenue as the allocation base, determine the profitability of each of the five customers. 2. Management felt that because the data revealed some customers require a disproportionate share of sales and support resources, activity-based costing should be used to determine customer protability. Use ABC to prepare a customer profitability analysis. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Management felt the easiest way to allocate the sales and support costs was based on the total revenue. Using total revenue as the allocation base, determine the profitability of each of the ve customers. (Round your intermediate calculations and final answers to 2 decimal places.) 148 000 198 000 418:000 588 000 1 H580 000 $ 0.00 Required 2 Required: 1. Management felt the easiest way to allocate the sales and support costs was based on the total revenue. Using total revenue as the allocation base, determine the profitability of each of the five customers. 2. Management felt that because the data revealed some customers require a disproportionate share of sales and support resources, activity-based costing should be used to determine customer profitability. Use ABC to prepare a customer profitability analysis. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Management felt that because the data revealed some customers require a disproportionate share of sales and support resources, activity-based costing should be used to determine customer profitability. Use ABC to prepare a customer profitability analysis. (Round your intermediate calculations and final answers to 2 decimal places.) Customer Gross Profit ABC Costs Net Profit After Support Costs Net Profit % A $ 148,000 % B 198,000 % C 228,000 D 418,000 E $ 588,000 % Totals $ 1,580,000 $ 0.00 $ 0.00
