Business, 31.10.2019 01:31 michelle8978

In the past, z company simply used a standard overhead rate to calculate cost for a customer, so two customers with the same revenue and product cost looked equally profitable on a percentage of sales basis z company has decided that this is providing poor information and encouraging salespeople to promise costly service to close the sale. z company has decided to adopt abc costing for customers. the have collected the following information about their service cost: cost of activity total company cost 4,200,000 310,000 775,000 700,000 8,500 activity cost driver driver volume $1,554,000 1,801,100 1,371,750 735,000 255,000 ее $5,716,850 calculate the profitability of the following two customers, given their activity levels. both companies provide gross margin (i. e., revenue - cost of goods sold) of $29,320. activity customer a 4,200 364 910 910 0 customer b 8,400 790 2500 2500 26 what is the operating profit for each customer using abc costing of the service cost? what suggestions do you have to improve the profitability of customer b? how would you explain your finding to the salesperson for customer b?

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