Reference no: EM132567388

The following table gives sales, product cost, and cost-to-serve data for a company that makes three product lines: A, B, and C. The company has two customer types.

                                   Product A                   Product B                         Product C

Sales                      $5,000                      $6,000                         $25,000

Cost of sales              4,500                       4,800                            15,000

                                       Customer Type 1                Customer Type 2            Total

Product A Sales                 $ 500                           $ 4,500                   $ 5,000

Product B Sales                      1,000                          5,000                        6,000

Product C Sales                       13,000                         12,000                     25,000

Manager Visits                         4                                      16                              20

The cost to serve all customers is $12,000 and is allocated to customer types based on the number of manager visits to customer locations for pre- and post-sales support.

Question 1: Determine the gross profit margin percentage of sales for each product. Which product is the most profitable?

Question 2: Determine the gross profit margin and the gross profit margin percentage of sales for each customer type.

Question 3: Determine the cost-to-serve percentage of sales for each customer type.

Question 4: Determine the operating income and operating income percentage of sales for each customer type.

Question 5: Which customer is the most profitable based the following profitability measures:

1. Gross margin
2. Gross margin percentage of sales
3. Operating income
4. Operating income percentage of sales