Ellie Mosk, CEO of X-Space Industries, decided to expand the company's product offering beyond the core model rocket business. After investigation, she decided to set up a separate division to design and manufacture products for the drone market. Several companies were interested in having X-Space develop these drones, and financial results, to date, have been encouraging. Revenue was $4 million, gross margins have been running about 40%, and the customer sales and support costs were $1 million. However, there is a growing concern that some customers require a disproportionate share of the sales and support resources, and the true profitability of the customers is unknown. Data were collected to support an analysis of customer profitability: Activity Sales Visits Product modifications Phone calls E-mail/electronic communications Cost Driver Sales visit days Number of modifications Number of minutes Number of communications Total Cost $ 489.000 273,000 93,300 175,000 $1,030,300 Visit Days Customer 625 Revenue $ 403,000 503.000 603.000 1,130.000 1.530.000 54.169.000 Gross Profit $ 153.000 203.000 233,000 423.000 593,000 $1,605,000 25 40 Phone Electronic Modifications Minutes Communications 1. 160 1.250 875 1.500 1.130 1.850 2.130 2.250 2.380 8,010 7.140 90 100 Totals 270 200 Required: 1. Management felt the easiest way to allocate the sales and support costs was based on the total revenue. Using total revenue as the allocation base, determine the profitability of each of the five customers. 2. Management felt that because the data revealed some customers require a disproportionate share of sales and support resources, activity-based costing should be used to determine customer profitability. Use ABC to prepare a customer profitability analysis. Requireu: 1. Management felt the easiest way to allocate the sales and support costs was based allocation base, determine the profitability of each of the five customers. 2. Management felt that because the data revealed some customers require a disprop activity-based costing should be used to determine customer profitability. Use ABC to Complete this question by entering your answers in the tabs below. Required 1 Required 2 Management felt the easiest way to allocate the sales and support costs was based on the t as the allocation base, determine the profitability of each of the five customers. (Round you. final answers to 2 decimal places.) Customer Gross Profit Share of Support Costs Based on Revenue Profit After Support Costs Profit % $ A B 153,000 203,000 233,000 423,000 593,000 1,605,000 Totals $ ( Required 1 Required 2 > 1. Management felt the easiest way to allocate the sales and support costs was based on the allocation base, determine the profitability of each of the five customers. 2. Management felt that because the data revealed some customers require a disproportionat activity-based costing should be used to determine customer profitability. Use ABC to prepare Complete this question by entering your answers in the tabs below. Required 1 Required 2 Management felt that because the data revealed some customers require a disproportionate share ol resources, activity-based costing should be used to determine customer profitability. Use ABC to prep profitability analysis. (Round your intermediate calculations and final answers to 2 decimal places.... Customer Gross Profit ABC Costs Net Profit After Support Costs Net Profit % $ 153,000 203,000 233,000 423,000 593,000 1,605,000 D $ $ Totals
