Software to large professional services firms. Management has decided to analyze certain costs related to sales to determine per-customer profitability and to plan for future sales efforts. These costs include sales commissions and overhead related to the corporate je expenses. They have determined that $200,000 of overhead costs related to the corporate jet should be assigned to individual customers. Sales representatives are paid a commission of 5% on Gross Profit (sales less costs to develop the software). In relation to overhead costs, the sales staff used the corporate jet at a cost 51,000 per hour for trips to customers as follows: Customer #1: 50 hours Customer #2: 43 hours Customer #3: 15 hours Customer #4: 8 hours. Customer #5: 10 hours Gross profit per customer is as follows: Customer #1: $340,000 Customer #2: $240,000 Customer #3: $60,000 Customer #4: $80,000 Customer #5: $60,000 NOTE: Do not round amounts until final calculation of customer profitability, then round to the nearest dollar). Which customer is the least profitable?

Software to large professional services firms. Management has decided to analyze certain costs related to sales to determine per-customer profitability and to plan for future sales efforts. These costs include sales commissions and overhead related to the corporate je expenses. They have determined that $200,000 of overhead costs related to the corporate jet should be assigned to individual customers. Sales representatives are paid a commission of 5% on Gross Profit (sales less costs to develop the software). In relation to overhead costs, the sales staff used the corporate jet at a cost 51,000 per hour for trips to customers as follows: Customer #1: 50 hours Customer #2: 43 hours Customer #3: 15 hours Customer #4: 8 hours. Customer #5: 10 hours Gross profit per customer is as follows: Customer #1: $340,000 Customer #2: $240,000 Customer #3: $60,000 Customer #4: $80,000 Customer #5: $60,000 NOTE: Do not round amounts until final calculation of customer profitability, then round to the nearest dollar). Which customer is the least profitable?

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter10: Cost Analysis For Management Decision Making

Section: Chapter Questions

Problem 18E

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