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?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Advanced Coding is a software development company that sells specialized practice management 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 jet
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 of
$1,000 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?
Transcribed Image Text:Advanced Coding is a software development company that sells specialized practice management 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 jet 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 of $1,000 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?
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