Wholesalers sells furniture items to four department-store chains. Sharon

AmesAmes

commented, "We apply ABC to determine product line profitability. The same ideas apply to customer profitability, and we should find out our customer profitability as well."

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Wholesalers sends catalogues to corporate purchasing departments on a monthly basis. The customers are entitled to return unsold merchandise within a six-month period from the purchase date and receive a full purchase-price refund. The following data were collected from last year's operations:

has calculated the following activity rates:

Activity	Cost Driver Rate
Regular order processing	$20	per regular order
Rush order processing	$100	per rush order
Returned items processing	$20	per item
Catalogues and customer support	$1,000	per customer

Required

Determine the contribution to profit from each chain last year. Cost of goods sold is

80%

of net sales. Comment on your solution.

Chain 1 Chain 2 Chain 3 Chain 4 Gross sales $ 50,000 $ 30,000 $ 100,000 $ 70,000 Sales returns Number of items 100 26 60 40 Amount $ 10,000 $ 5,000 $ 7,000 $ 6,000 Number of orders 150 Regular Rush 40 50 70 10 50 10 30