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 activity?all 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

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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 % Profitmax Performance Evaluation Cloud Software, LLC Customer: Philadelphia Strategic Analytics Implementers Product: Product: Product: Product: Financial Optimization Descriptive Predictive Performance Analytics Analytics Analytics 2,719,200 323,820 57,600 226,080 1,319,560 86,240 255,596 119,600 1,430,784 493,810 63,360 452,892 Product: Prescriptive Analytics Total 175,920 5,032,310 53,280 380,080 84,915 2,450,267 2,830,347 2,201,963 43.8% Number of products Number of orders Number of custom designs DIL Hours per product Selling price per product DIM cost per product DIL per hour Activity Cost Pool Consulting support Fee structure support Implementation design Design analysis Customer service $ $ $ $ $ $ Product Related Information 128 36 $ $ 24 78.50 8,995 $ 450 $ 22.50 $ 88 11,134,530 251,650 18 92.50 14,995 $ 980 $ 31.40 $ ABC Costing - Activity Cost Pool POR Rate Analysis Activity Rate Calculation Est. Cost Pool Est. Cost Driver POR Rate 10,527,192 404,892 1,125,600 3,216 701,520 888 404,892 184 160 16 70 108.00 16,995 $ 650 $ 72.00 $ 132 38 12 94.00 12,995 $ 480 $ 36.50 $ Basis per DIL Hour per order per custom design per DIL Hour per customer 74 16 22 42.50 10,995 720 27.00 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 % Profitmax Performance Evaluation Cloud Software, LLC Customer: Philadelphia Strategic Analytics Implementers Product: Product: Product: Product: Financial Optimization Descriptive Predictive Performance Analytics Analytics Analytics 2,719,200 323,820 57,600 226,080 1,319,560 86,240 255,596 119,600 1,430,784 493,810 63,360 452,892 Product: Prescriptive Analytics Total 175,920 5,032,310 53,280 380,080 84,915 2,450,267 2,830,347 2,201,963 43.8% Number of products Number of orders Number of custom designs DIL Hours per product Selling price per product DIM cost per product DIL per hour Activity Cost Pool Consulting support Fee structure support Implementation design Design analysis Customer service $ $ $ $ $ $ Product Related Information 128 36 $ $ 24 78.50 8,995 $ 450 $ 22.50 $ 88 11,134,530 251,650 18 92.50 14,995 $ 980 $ 31.40 $ ABC Costing - Activity Cost Pool POR Rate Analysis Activity Rate Calculation Est. Cost Pool Est. Cost Driver POR Rate 10,527,192 404,892 1,125,600 3,216 701,520 888 404,892 184 160 16 70 108.00 16,995 $ 650 $ 72.00 $ 132 38 12 94.00 12,995 $ 480 $ 36.50 $ Basis per DIL Hour per order per custom design per DIL Hour per customer 74 16 22 42.50 10,995 720 27.00

Answer rating: 100% (QA)

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