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Sofa Store sells its products for $500 per unit and has two customers: Upscale and Family. The firm's Cost of Goods Sold ratio is
Sofa Store sells its products for $500 per unit and has two customers: Upscale and Family. The firm's Cost of Goods Sold ratio is 60% of revenues. Sofa Store currently allocates customer support costs at a rate of 30% of customer revenues. Upscale purchased 5,000 units and Family purchased 8,000 units. Using the current costing system to allocate support costs and using the profitability measure Operating Income as a Percentage of Revenue, which answer below best represents profitability of the two customers? Multiple Choice Upscale most profitable followed by Family Family most profitably followed by Upscale Neither customer is profitable Profitability is the same for both customers
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