Carmel Company has a frequent buyer program for its customers, where the customers can attain an "elite" level based on the number of orders and the total revenue of the orders. There are two elite levels: Platinum and Titanium. The benefits of elite membership include discounts and access to special customer service representatives who can resolve problems. The company has one full-time customer representative per 200 Titanium customers and one fulltime customer representative per 2,000 Platinum customers. Customer representatives receive salaries plus bonuses of 2 percent of customer gross margin. Lighthouse spends 70 percent of its promotion costs on Titanium customers to encourage their loyalty.

Required
a. What is the excess of gross margin over customer costs for each category of customer?
b. Write a short memo that evaluates customer profitability.

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Customer Costs TotalTitanium Platinum Average customer represenatv sala30,0006,000 24,000 $60,000 $60,000 $2,000,000 Average gross margin per customer......... $1,500 280