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Question 2 (evaluating customer profitability) You own a credit card company. You want to evaluate the profitability of two representative customers, A and B. The
Question 2 (evaluating customer profitability) You own a credit card company. You want to evaluate the profitability of two representative customers, A and B. The numbers for customers A and B are as follows: customer Acustomer B credit card balance $500 $200 number of transactions number of customer-support calls 20 50 20 Your revenues and costs for customers are as follows: * Revenues: The only source of revenue is the interest you charge on credit card balances. You charge customers an interest rate of 40% (40% APR). So, if the credit card balance is $100, your revenue is $100*0.4=$40. * Costs: based on the estimates from your ABC system, each transaction costs you $1, and each customer-support call costs you $8. Ignore all other costs. Required: a) compute the revenue you get from each customer, and the costs of serving each customer. customer A customer B Revenue Cost of transactions $ $ 444 Cost of customer-support calls $ b) compute the profit margin for each customer. If you get a negative number, enter it with a minus sign, i.e., enter negative $200 as -200 not ($200) profit margin for A = $ profit margin for B = $
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