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Evaluating customer profitability You own a credit card company. You want to evaluate the profitability...

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Accounting

Evaluating customer profitability You own a credit card company. You want to evaluate the profitability of customers A and B.

customer A customer B
credit card balance $1,000 $400
number of transactions 100 40
number of customer-support calls 40 2

The only source of revenue from customers is the interest that you charge on credit card balances. You charge customers an interest rate of 10%. Thus, if the credit card balance is $1,000, revenue is $1000*0.1=$100. Variable costs are zero for simplicity. From your ABC system, the activity rates are $0.25 per transaction and $2 per customer-support call. a) Compute revenue, costs, and profit margin for each customer.

customer A customer B
Revenue $ $
Variable costs $ $
Contribution margin $ $
Allocated costs - transactions $ $
Allocated costs - customer support $ $
Profit margin $ $

Enter negative numbers with a minus sign, i.e., a loss of $200 should be entered as -200, not as (200) or ($200).

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