Environmental Business Consultants (EBC) serves three different sizes of clients (large,

medium, and small). EBC’s solid waste rate review projects are fairly standardized and

routine; hence, the pricing is also standardized for all clients. Although the company is

profitable overall, the CFO thinks the net margins should be higher. She is concerned that

customer support costs are eating up some of the margin and has decided to do a customer

profitability analysis based on the three different sizes of clients to see if some of the client

groups may actually be less profitable than others. The following data for the most

recent period have been collected to support the analysis:

Required
1. Calculate the customer profitability for each customer group, taking into account the
support activity required for each customer group.

2. Comment on the usefulness of this type of analysis. What reasonable actions might

the CEO take as a result of this analysis?

Transcribed Image Text:

Support Activity A. Scope change requests. B. Visits to client.... C. Communication... Driver Number of requests Number of visits Number of calls Cost per Driver Unit $150 $200 $ 50