Villeagas Wholesalers sells furniture items to four department store chains (customers). Mr. Villeagas 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." Villeagas Wholesalers sends catalogs 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:

Villeagas has calculated the following activity rates. Activity
Required
Regular order processing $20 per regular order
Rush order processing $100 per rush order
Returned items processing $10 per item
Catalogs and customer support $1,000 per customer
Customers pay the transportation costs. The cost of goods sold averages 80% of sales. Determine the contribution to profit from each chain last year. Comment on your solution.
Customers pay the transportation costs. The cost of goods sold averages 80% of sales.
Required
Determine the contribution to profit from each chain last year. Comment on your solution.

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