Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed

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). $ $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

NHS Audit Committee Handbook Practical Guides

Authors: Governance And Audit Committee

3rd Edition

1904624839, 978-1904624837

More Books

Students also viewed these Accounting questions