Denise Nelson owns Interiors by Denise, an interior design consulting and window treatment fabrication business. Her business is made up of two different distribution channels, a consulting business in which Denise serves two architecture firms (Attractive Abodes and Better Buildings) and a commercial window treatment business in which Denise designs and constructs window treatments for three commercial clients (Cheery Curtains, Delightful Drapes, and Elegant Extras). Denise would like to evaluate the profitability of her two architecture firm clients and three commercial window treatment clients, as well as evaluate the profitability of each of the two channels and the business as a whole. Information about her most recent quarter follow:

Overhead costs total 170,200. Denise has determined that 25% of her overhead costs relate directly to her architectural business, 40% relate directly to her window treatment business, and the remainder are general in nature.

Required

On the revenues indicated above, Denise gave a 10% discount to Attractive Abodes in order to lure it away from a competitor and gave a 5% discount to Elegant Extras for advance payment in cash.
1. Prepare a customer-cost hierarchy report for Interiors by Denise, using the format in Exhibit 15-6.

 2. Prepare a customer-profitability analysis for the five customers, using the format in Exhibit 15-4.

3. Comment on the results of the preceding reports. What recommendations would you give Denise?

Transcribed Image Text:

Gross revenue Customer-level costs Attractive Better Cheery Abodes Buildings Curtains (AA) (BB) (CC) $117,000 $94,400 $178,690 73,500 58,600 109,290 Delightful Drapes (DD) $73,920 57,860 Elegant Extras (EE) $36,600 28,520