Question 1: Managing Customers

Question 1.1 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 Revenues $600,000 $750,000 $ 700,000 $2,050,000 Direct Costs $450,000 $562,500 $525,000 $1,537,500 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 Cost Pool Activity Base Quantity Ordering costs $80,000 No. of customer orders 40,000 Product design costs $20,000 No. of product designs 400 Customer service costs $30,000 No. of customer complaints 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 220 110 130 No. of customer complaints 250 150 190