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Kresge Lodging has an elite program for its card members. There are three levels, based on total nights stayed: Diamond (50 nights or more); Platinum (25 nights or more); and Base (fewer than 25 nights). In order to facilitate reservations and answer customer questions, Kresge Lodging provides access to special customer service representatives, who work exclusively with the designated level (Diamond, and so on). Customer representatives receive salaries plus bonuses of 5 percent of customer gross margin. The company provides various perquisites (free nights, upgrades, and so on) to its members, with 75 percent of the cost of the perquisites used for the benefit of Diamond members, 20 percent for Platinum members, and 5 percent for Base members. Customer Costs Number of members Average customer representative salary Total 159,000 Diamond 20,700 $79.500 Platinum 54,500 $ 52.700 Base 83,800 $41.800

Kresge Lodging has an elite program for its card members. There are three levels, based on total nights stayed: Diamond (50 nights or more); Platinum (25 nights or more); and Base (fewer than 25 nights). In order to facilitate reservations and answer customer questions, Kresge Lodging provides access to special customer service representatives, who work exclusively with the designated level (Diamond, and so on). Customer representatives receive salaries plus bonuses of 5 percent of customer gross margin. The company provides various perquisites (free nights, upgrades, and so on) to its members, with 75 percent of the cost of the perquisites used for the benefit of Diamond members, 20 percent for Platinum members, and 5 percent for Base members. Customer Costs Number of members Average customer representative salary Total 159,000 Diamond 20,700 $79.500 Platinum 54,500 $ 52.700 Base 83,800 $41.800

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Kresge Lodging has an elite program for its card members. There are three levels, based on total nights stayed: Diamond (50 nights or more); Platinum (25 nights or more); and Base (fewer than 25 nights). In order to facilitate reservations and answer customer questions, Kresge Lodging provides access to special customer service representatives, who work exclusively with the designated level (Diamond, and so on). Customer representatives receive salaries plus bonuses of 5 percent of customer gross margin. The company provides various perquisites (free nights, upgrades, and so on) to its members, with 75 percent of the cost of the perquisites used for the benefit of Diamond members, 20 percent for Platinum members, and 5 percent for Base members. Customer Costs Number of members. Total 159,000 Diamond 20,700 28 $ 6,800,000 $ 79,500 15 Platinum 54,500 $ 52,700 8 Base 83,800 $ 41,800 5 Average customer representative salary Number of representatives Perquisite costs Average annual gross margin per customer $ 1,200 $ 400 $200 The gross margin received by Kresge is the amount received from the participating hotels for a customer's stay. Required: What is the excess of gross margin over customer costs for each category of customer?
Transcribed Image Text:Kresge Lodging has an elite program for its card members. There are three levels, based on total nights stayed: Diamond (50 nights or more); Platinum (25 nights or more); and Base (fewer than 25 nights). In order to facilitate reservations and answer customer questions, Kresge Lodging provides access to special customer service representatives, who work exclusively with the designated level (Diamond, and so on). Customer representatives receive salaries plus bonuses of 5 percent of customer gross margin. The company provides various perquisites (free nights, upgrades, and so on) to its members, with 75 percent of the cost of the perquisites used for the benefit of Diamond members, 20 percent for Platinum members, and 5 percent for Base members. Customer Costs Number of members. Total 159,000 Diamond 20,700 28 $ 6,800,000 $ 79,500 15 Platinum 54,500 $ 52,700 8 Base 83,800 $ 41,800 5 Average customer representative salary Number of representatives Perquisite costs Average annual gross margin per customer $ 1,200 $ 400 $200 The gross margin received by Kresge is the amount received from the participating hotels for a customer's stay. Required: What is the excess of gross margin over customer costs for each category of customer?
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