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Chapter 5 Post Class Assignment i Saved Help Save & Exit Submit 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: 04:06:10 Activity Cost Driver Total Cost Sales visits Sales visit days $ 491,080 Product modifications Number of modifications 275,080 Phone calls Number of minutes 93, 500 E-mail/electronic communications Number of communications 177, 900 4 $ 1, 936,508 Phone Electronic Customer Revenue Gross Profit Visit Days Modifications Minutes Communications $ 405, 090 $ 155,090 13 15 1 , 180 625 505, 090 205,606 25 1, 270 875 695, 000 235, 600 40 1.520 1, 150 1, 150, 020 425,600 90 60 1, 870 2, 150 1,550, 020 595,600 130 70 2, 270 2,400 Totals $4, 215, 090 $1, 615,600 270 260 8, 110 7, 200 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. Mc Graw