Custom Course Packets has hired you to calculate the profitability of its three customer groups. Here...

 

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Custom Course Packets has hired you to calculate the profitability of its three customer groups. Here are the revenues and directly traceable costs for each customer group: Individual Corporate University Total Customers Customers Customers $600,000 $450,000 $750,000 $562,500 $700,000 $525,000 $2,050,000 $1,537,500 Revenues Direct Costs In addition, there are $130,000 in costs that cannot be directly traced to the customer groups. You have decided to use activity-based costing to allocate the costs to each customer group. Here are the cost pools (along with the respective activity base) for the company as a whole: Activity Base No. of customer orders Cost Pool Activity Ordering costs Product design costs $80,000 $20,000 $30,000 No. of product designs No. of customer complaints Quantity 40,000 400 Customer service costs 500 Below are the activity levels for each customer type: Individual Corporate University Customers Customers Customers No. of customer orders 30,000 15,000 13,000 No. of product designs No. of customer complaints 220 110 130 250 150 190 Required: Question 1.1.1 Prepare a customer profitability analysis for each customer group and comment on their relative profitability. [Word limit for later part: 100 words. Note the word count at the end of your answer] Your Answer (expand the space as required): Word count: Question 1.1.2 Would you recommend dropping the customer group that generate the lowest profit? Explain your answer. [Word limit: 100 words. Note the word count at the end of your answer] Your Answer (expand the space as required): Question 1.2 "Individual customer satisfaction does not necessarily lead to customer profitability. Moreover, there are many other factors that may assist in understanding and managing the firms' customers." Explain the statement. [Word limit: 200 words. Note the word count at the end of your answer] Your Answer (expand the space as required): Custom Course Packets has hired you to calculate the profitability of its three customer groups. Here are the revenues and directly traceable costs for each customer group: Individual Corporate University Total Customers Customers Customers $600,000 $450,000 $750,000 $562,500 $700,000 $525,000 $2,050,000 $1,537,500 Revenues Direct Costs In addition, there are $130,000 in costs that cannot be directly traced to the customer groups. You have decided to use activity-based costing to allocate the costs to each customer group. Here are the cost pools (along with the respective activity base) for the company as a whole: Activity Base No. of customer orders Cost Pool Activity Ordering costs Product design costs $80,000 $20,000 $30,000 No. of product designs No. of customer complaints Quantity 40,000 400 Customer service costs 500 Below are the activity levels for each customer type: Individual Corporate University Customers Customers Customers No. of customer orders 30,000 15,000 13,000 No. of product designs No. of customer complaints 220 110 130 250 150 190 Required: Question 1.1.1 Prepare a customer profitability analysis for each customer group and comment on their relative profitability. [Word limit for later part: 100 words. Note the word count at the end of your answer] Your Answer (expand the space as required): Word count: Question 1.1.2 Would you recommend dropping the customer group that generate the lowest profit? Explain your answer. [Word limit: 100 words. Note the word count at the end of your answer] Your Answer (expand the space as required): Question 1.2 "Individual customer satisfaction does not necessarily lead to customer profitability. Moreover, there are many other factors that may assist in understanding and managing the firms' customers." Explain the statement. [Word limit: 200 words. Note the word count at the end of your answer] Your Answer (expand the space as required):