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 $1,000 $400 number of transactions 100 40 number of customer-support calls 40 2 The only source of revenue from customers is the interest that you charge on credit card balances. You charge customers an interest rate of 30%. Thus, if the credit card balance is $1,000, revenue is $1000*0.3=$300. Variable costs are zero for simplicity. From your ABC system, the activity rates are $0.75 per transaction and $6 per 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 $ 1$ 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). b) One of the customers is unprofitable. What can you do about this customer? (select all that apply) limit the number of free customer-support calls "fire" the customer increase the interest rate you cannot do anything -- regardless of what you do, about 40-50% of your customers will be unprofitable. That is just the cost of doing business. If you get rid of customer A, profit will: o remain the same in the long term o decrease by $300 in the long term decrease by $15 in the long term increase by $15 in the long term