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 Number of representatives Total 166,000 28 $ 7,500,000 Diamond 22,800 $ 83,000 15 $ 1,200 Platinum Required: a. What is the excess of gross margin over customer costs for each category of customer? b. Which customers are more profitable? 58,000 $ 54,800 8 Perquisite costs Average annual gross margin per customer The gross margin received by Kresge is the amount received from the participating hotels for a customer's stay. Base 85,200 $ 43,200 5 $ 400 $ 200
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 Number of representatives Total 166,000 28 $ 7,500,000 Diamond 22,800 $ 83,000 15 $ 1,200 Platinum Required: a. What is the excess of gross margin over customer costs for each category of customer? b. Which customers are more profitable? 58,000 $ 54,800 8 Perquisite costs Average annual gross margin per customer The gross margin received by Kresge is the amount received from the participating hotels for a customer's stay. Base 85,200 $ 43,200 5 $ 400 $ 200
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Do not give image format
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Required A Required B
What is the excess of gross margin over customer costs for each category of customer?
Total gross margin
Customer representative salaries
Customer representative bonuses
Perquisite costs
Net profit
Show Transcribed Text
Required A Required B
Diamond
Which customers are more profitable?
Which customers are more profitable?
< Required A
Platinum
Complete this question by entering your answers in the tabs below.
< Required A
J
Required B
Base
>
Required B >
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
Average customer representative salary
Number of representatives
Total
166,000
28
$ 7,500,000
Diamond
22,800
$ 83,000
15
$ 1,200
Platinum
58,000
$ 54,800
8
Perquisite costs
Average annual gross margin per customer
The gross margin received by Kresge is the amount received from the participating hotels for a customer's stay.
Required:
a. What is the excess of gross margin over customer costs for each category of customer?
b. Which customers are more profitable?
Base
85,200
$ 43,200
5
$ 400
$ 200
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education