Ames Wholesalers sells furniture items to four department store chains. Sharon Ames commented, "We apply ABC to determine profit line profitability. The same ideas apply to customer profitability, and we should find out our customer profitability as well." Ames Wholesalers sends catalogues to the 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:

Ames has calculated the following activity rates:
ActivityCost 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.

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Chain 1 Chain 2 Chain 3 Chain 4 Gross sales $50,000 $30,000 S100,000 $70,000 Sales returns: 100 Number of items Amount 60 S 7,000 26 40 $10,000 5,000 6,000 Number of orders: 150 Regular Rush 40 50 70 10 50 10 30