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Question 3: Evaluating customer profitability. You own a credit card company. You want to evaluate the profitability of customers A and B. customer A customer
Question 3: Evaluating customer profitability. You own a credit card company. You want to evaluate the profitability of customers A and B. customer A customer B credit card balance $2,000 $800 number of transactions 80 number of customer-support calls 4 200 80 The only source of revenue from customers is the interest that you charge on credit card balances. You charge customers an interest rate of 20%. Thus, if the credit card balance is $1,000, revenue is $1000*0.2=$200. $4 per Variable costs are zero for simplicity. From your ABC system, the activity rates are $0.5 per transaction customer-support call. a) Compute revenue, costs, and profit margin for each customer. customer A customer B Revenue $ $ $ $ Variable costs Contribution margin Allocated costs - transactions $ Allocated costs - customer support $ Profit margin $ Enter negative numbers with a minus sign, i.e., a loss of $200 should be entered as -200, not as (200) or ($200). $ $
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