Abc Wholesale Customer Profitability Ramirez Wholesalers Operates At Capacity And

ABC, wholesale, customer profitability Ramirez Wholesalers operates at capacity and sells furniture items to four department-store chains (customers). Mr. Ramirez commented, “We apply ABC to determine product-line profitability. The same ideas apply to customer profitability, and we should find out our customer profitability as well.” Ramirez Wholesalers sends catalogs to corporate purchasing departments on a monthly basis. The customers are entitled to return unsold merchandise within a six-month period from the purchase date and receive a full purchase price refund. The following data were collected from last year’s operations:

ABC, wholesale, customer profitability Ramirez Wholesalers opera

Ramirez has calculated the following activity rates:
Activity Cost-Driver Rate
Regular order processing $25 per regular order
Rush order processing $125 per rush order
Returned items processing $15 per item
Catalogs and customer support $1,100 per customer
Customers pay the transportation costs. The cost of goods sold averages 70% of sales.
Determine the contribution to profit from each chain last year. Comment on yoursolution.

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