03 and the COGS per unit is $6.89. For Product B, the price per unit is $20.46 and the COGS per unit is $16.37. For Product C. The price per unit is $51.37 and the COGS per unit is $41.10. For Product D. The price per unit is $90 and the COGS per unit is $50.63.
The next step is to produce an income statement for each customer type.
Problem 12-34
Product a
B
C
D
Price
$11.03
$20.47
$51.38
$90.00
COGS
$6.90
$16.37
$41.10
$50.63
Customer a
Customer B
Customer C
Revenue
$42,822
$141,384
$359,793
COGS
$25,322
$91,759
$278,319
Gross Profit
$17,501
$49,625
$81,474
Gross Margin
40.87%
35.10%
22.64%
The most profitable customer is Customer a.
The cost to serve % of sales is based on the $140,000 cost to serve expense, which is allocated on the basis of sales. This is calculated as follows:
Customer a
Customer B
Customer C
% of sales
7.87%
25.99%
66.14%
Cost to Serve
$11,020
$36,386
$92,594
These are the cost to serve percentage of sales. The most expensive customer to serve is customer C. This is also the customer with the lowest margins, but the highest dollar value of sales. However, all have the same cost-to-serve as a percentage of sales, because cost-to-serve is allocated as a percentage of sales. The figure is 25.74%.
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