Problem 1 - 25 Points:

ProfitMax Performance Evaluation Cloud Software, LLC sells five (5) highly sophisticated and integrated information system analytics products, identified as Product: Financial Performance, Optimization Analytics, Descriptive Analytics, Predictive Analytics, and Prescriptive Analytics.

You are being asked to determine the profitability of one customer and also determine the customer profit margin, by product sold. Philadelphia Strategic Analytics Implementers is the customer in question and management is concerned that the operations result are not truly indicative of operation costs and are looking to evaluate the profitability of the customer.

You are given two informational tables, one with detail information for each of the products and another table for the purpose of calculating the ABC activity rates (POR).

ProfitMax Performance Evaluation Cloud Software, LLC has recently implemented an ABC system. The system implemented activity cost pools for the following:

Activity Cost Pool	Activity Rate
Consulting support	? to be calculated	per Direct Labor Hour
Fee structure support	? to be calculated	per order processed
Implementation design	? to be calculated	per custom design
Design analysis	? to be calculated	per Direct Labor Hour
Customer service	? to be calculated	per Customer

The detail information in the first table indicate the selling price per unit, the direct material and direct labor costs, and the ABC activity costs per product. Complete the first table indicating the revenues and cost for each product and in total. Calculate the product profit margin for each product and the total customer margin for the customer. Also calculate the total customer profit margin percent for the customer.

Customer Service (Activity Pool) is a customer level activityall other activity pools are product level costs. I.e. you should only charge Customer Service once to the customer and not to any particular product.

Profitmax Performance Evaluation Cloud Software, LLC
Customer: Philadelphia Strategic Analytics Implementers
	Product: Financial Performance	Product: Optimization Analytics	Product: Descriptive Analytics	Product: Predictive Analytics	Product: Prescriptive Analytics	Total
Sales						-
Costs:
Direct Materials						-
Direct Labor						-
Fee structure support						-
Implementation design						-
Consulting support						-
Design analysis						-
Customer service
Total Costs						-
Product profit margin
Customer profit margin						-
Customer Profit Margin %						#DIV/0!
Product Related Information
Number of products	130	87	185	133	75
Number of orders	36	18	160	38	16
Number of custom designs	24	-	16	12	22
D/L Hours per product	78.50	92.00	108.00	94.00	42.50
Selling price per product	$ 8,995	$ 14,995	$ 16,995	$ 12,995	$ 10,995
D/M cost per product	$ 450	$ 980	$ 650	$ 490	$ 720
D/L per hour	$ 22.50	$ 31.40	$ 72.00	$ 36.50	$ 27.00
ABC Costing - Activity Cost Pool POR Rate Analysis
Activity Rate Calculation
Activity Cost Pool	Est. Cost Pool	Est. Cost Driver	POR Rate	Basis
Consulting support	$ 10,576,332	406,782		per D/L Hour
Fee structure support	$ 1,125,600	3,216		per order
Implementation design	$ 701,520	888		per custom design
Design analysis	$ 11,186,505	406,782		per D/L Hour
Customer service	$ 251,650	70		per customer