ABC, wholesale, customer profitability. Villeagas Wholesalers operates at capacity and sells furniture items to tour department store chains (customers). Mr. Villeagas commented, ?oWe apply ABC to determine product line profitability. The same ideas apply to customer profitability, and we should find out our customer profitability as well.?? Villeagas 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:
Villeagas has calculated the following activity rates.
Customers pay the transportation costs. The cost of goods sold averages 80% of sales.
Determine the contribution to profit from each chain last year. Comment on your solution.