Ellie Mosk, CEO of X-Space Industries, decided to expand the company's product offering beyond the core...

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Ellie Mosk, CEO of X-Space Industries, decided to expand the company's product offering beyond the core model rocket business. After investigation, she decided to set up a separate division to design and manufacture products for the drone market. Several companies were interested in having X-Space develop these drones, and financial results, to date, have been encouraging. Revenue was $4 million, gross margins have been running about 40%, and the customer sales and support costs were $1 million. However, there is a growing concern that some customers require a disproportionate share of the sales and support resources, and the true profitability of the customers is unknown. Data were collected to support an analysis of customer profitability: Activity Sales visits Product modifications Phone calls E-mail/electronic communications Cost Driver Sales visit days Number of modifications Number of minutes Number of communications Total Cost $ 492,000 276,000 93,600 178,000 $ 1,039,600 Visit Customer Revenue Gross Profit Days Modifications Phone Minutes Electronic Communications A $ 406,000 $ 156,000 15 15 1,190 625 B C BUDE 506,000 206,000 25 15 1,280 875 606,000 236,000 40 40 1,530 1,160 D 1,160,000 426,000 90 60 1,880 2,160 E 1,560,000 596,000 100 70 2,280 2,410 Totals $4,238,000 $1,620,000 270 200 8,160 7,230 Required: 1. Management felt the easiest way to allocate the sales and support costs was based on the total revenue. Using total revenue as the allocation base, determine the profitability of each of the five customers. 2. Management felt that because the data revealed some customers require a disproportionate share of sales and support resources, activity-based costing should be used to determine customer profitability. Use ABC to prepare a customer profitability analysis. Required 1 Required 2 Management felt the easiest way to allocate the sales and support costs was based on the total revenue. Using total revenue as the allocation base, determine the profitability of each of the five customers. (Round your intermediate calculations and final answers to 2 decimal places. For percentages .1234 = 12.34%.) Share of Support Costs Based on Revenue Profit After Support Profit % Costs Customer Gross Profit A $ 156,000 B 206,000 C 236,000 D 426,000 E $ 596,000 Totals $ 1,620,000 $ 0.00 S % % % ABC Customer A Gross Profit ABC Costs Net Profit After Support Costs Net Profit % $ 156,000 % B 206,000 % 236,000 % % D 426,000 % % E $ 596,000 % 0.00 Totals $ 1,620,000 $ 0.00 $ 69 0.00 Ellie Mosk, CEO of X-Space Industries, decided to expand the company's product offering beyond the core model rocket business. After investigation, she decided to set up a separate division to design and manufacture products for the drone market. Several companies were interested in having X-Space develop these drones, and financial results, to date, have been encouraging. Revenue was $4 million, gross margins have been running about 40%, and the customer sales and support costs were $1 million. However, there is a growing concern that some customers require a disproportionate share of the sales and support resources, and the true profitability of the customers is unknown. Data were collected to support an analysis of customer profitability: Activity Sales visits Product modifications Phone calls E-mail/electronic communications Cost Driver Sales visit days Number of modifications Number of minutes Number of communications Total Cost $ 492,000 276,000 93,600 178,000 $ 1,039,600 Visit Customer Revenue Gross Profit Days Modifications Phone Minutes Electronic Communications A $ 406,000 $ 156,000 15 15 1,190 625 B C BUDE 506,000 206,000 25 15 1,280 875 606,000 236,000 40 40 1,530 1,160 D 1,160,000 426,000 90 60 1,880 2,160 E 1,560,000 596,000 100 70 2,280 2,410 Totals $4,238,000 $1,620,000 270 200 8,160 7,230 Required: 1. Management felt the easiest way to allocate the sales and support costs was based on the total revenue. Using total revenue as the allocation base, determine the profitability of each of the five customers. 2. Management felt that because the data revealed some customers require a disproportionate share of sales and support resources, activity-based costing should be used to determine customer profitability. Use ABC to prepare a customer profitability analysis. Required 1 Required 2 Management felt the easiest way to allocate the sales and support costs was based on the total revenue. Using total revenue as the allocation base, determine the profitability of each of the five customers. (Round your intermediate calculations and final answers to 2 decimal places. For percentages .1234 = 12.34%.) Share of Support Costs Based on Revenue Profit After Support Profit % Costs Customer Gross Profit A $ 156,000 B 206,000 C 236,000 D 426,000 E $ 596,000 Totals $ 1,620,000 $ 0.00 S % % % ABC Customer A Gross Profit ABC Costs Net Profit After Support Costs Net Profit % $ 156,000 % B 206,000 % 236,000 % % D 426,000 % % E $ 596,000 % 0.00 Totals $ 1,620,000 $ 0.00 $ 69 0.00