Assignment
Determine product lines and customer profitability.
Radiant Company makes three product lines and has two customer types. Use the data in the tables below to calculate profitability. Radiant has a cost to serve all customers of $10,000 which is allocated to customer types based on the number of manager visits to customer locations for sales support.
Product Division: Shine Glow Shimmer
Sales $8,000 $20,000 $4,000
Cost of goods sold $2,000 $14,000 $2,000
Customer Types: Type A Type B
Product Shine Sales $3,000 $5,000
Product Glow Sales $19,000 $1,000
Product Shimmer Sales $2,000 $2,000
Manager Visits 4 6
Required:
1. Determine the gross profit margin and gross profit margin percentage of sales for each product. Which product is the most profitable?
2. Determine the gross profit margin and the gross profit margin percentage of sales for each customer type.
3. Determine the cost-to-service percentage of sales for each customer type. Which customer is the most profitable and why?