Two Calculations Can Be Made to Measure Customer Profitability: Customer

question 38

Essay

Two calculations can be made to measure customer profitability: customer net profit and customer profit margin.
a.What is the formula for customer net profit?
b.What is the formula for customer profit margin?

---

Definitions:

Complexity

The state or quality of being intricate or complicated, often used to describe systems, processes, or situations that are difficult to understand or manage.

Plantwide Overhead Rate

A single predetermined overhead rate that is used throughout a plant.

Departmental Overhead Rates

Specific overhead rates calculated for different departments within a company to more accurately assign costs.

Activity-based Costing

A costing method that assigns overhead costs to products based on the activities that consume resources in producing the product.