Exam 17: Topic Focus Customer Profitability

Assume you are a sales manager responsible for analyzing the profitability of the customers in your territory.You have gathered the following information on one of your customers: a.Calculate the customer net profit. b.Calculate the customer profit margin.

Customer profit margin divides customer net profit by customer revenues to obtain the profit percentage the customer generates for the company.

Selling expenses are expenses that are associated with only the delivery of products to the customer.

Calculations to measure customer profitability include customer net profit and customer profit margin.

Which of the following is $\textbf{ not }$ a step in using activity-based costing?

The measure that divides customer net profit by customer revenues is referred to as

Georgia Manufacturing Company has provided the following information for calculating cost pool rates for selling activities: Required: Calculate the activity cost pool rate for each selling activity.

Measuring customer profitability only by looking at whether the sales revenue a customer generates exceeds the cost of goods sold ignores

Which of the following is $\textbf{ not }$ a step managers might take after identifying an unprofitable customer?

The revenue a customer generates should cover which of the following costs?

As long as the sales revenue a customer generates exceeds the cost of goods sold,the customer is profitable.

One way for managers to get an estimate of customer profitability is to allocate expenses to customers through activity-based costing.

If unprofitable customers $\textbf{ cannot }$ be turned to profitable ones,the company should $\textbf{ never }$ drop them.

Which of the following is $\textbf{ not }$ an administrative expense?

Some companies believe that as long as the sales revenue a customer generates exceeds the cost of goods sold, that the customer is profitable. However, companies incur product costs, selling costs, and administrative costs. Required: a. List three items that would be classified as product costs. b. List three items that would be classified as selling costs. c. List three items that would be classified as administrative costs.

The customer profit margin divides

The customer profit margin allows managers to compare customers based on

In their book Killer Customers,Larry Selden and Geoffrey Colvin estimate that the bottom 5% of a company's customers lose as much as 100% of the company's profits.

Raising prices for unprofitable customers is a reflection of the cost of doing business with them.

Selling expenses include which of the following?