Ellie Mosk, CEO of X-Space Industries, decided to expand thecompany’s product offering beyond the core model rocket business.After investigation, she decided to set up a separate division todesign and manufacture products for the drone market. Severalcompanies 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 thecustomer sales and support costs were $1 million. However, there isa growing concern that some customers require a disproportionateshare of the sales and support resources, and the trueprofitability of the customers is unknown. Data were collected tosupport an analysis of customer profitability: Activity Cost DriverTotal Cost Sales visits Sales visit days $ 485,000 Productmodifications Number of modifications 261,000 Phone calls Number ofminutes 92,100 E-mail/electronic communications Number ofcommunications 163,000 $ 1,001,100 Customer Revenue Gross ProfitVisit Days Modifications Phone Minutes Electronic Communications A$ 399,000 $ 149,000 15 15 1,040 625 B 499,000 199,000 25 15 1,130875 C 599,000 229,000 40 40 1,380 1,010 D 1,010,000 419,000 90 601,730 2,010 E 1,490,000 589,000 100 70 2,130 2,260 Totals $3,997,000 $ 1,585,000 270 200 7,410 6,780 Required: 1. Managementfelt the easiest way to allocate the sales and support costs wasbased on the total revenue. Using total revenue as the allocationbase, determine the profitability of each of the five customers. 2.Management felt that because the data revealed some customersrequire a disproportionate share of sales and support resources,activity-based costing should be used to determine customerprofitability. Use ABC to prepare a customer profitabilityanalysis.