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 168,500 28 $ 7,680,000 Diamond 23,400 $ 84,000 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? 59,500 $ 55,400 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 85,600 $ 43,600 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 168,500 28 $ 7,680,000 Diamond 23,400 $ 84,000 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? 59,500 $ 55,400 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 85,600 $ 43,600 5 $ 400 $ 200
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please be as detailed as possible in answering all requirements. Thank you in advance.
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?
Platinum
Total gross margin
Customer representative salaries
Customer representative bonuses
Perquisite costs
Net profit
Diamond
< Required A
Required B
Base
>
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
Perquisite costs
Average annual gross margin per customer
Total
168,500
28
$ 7,680,000
Diamond
23,400
$ 84,000
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?
59,500
$ 55,400
8
$ 400
Base
85,600
$ 43,600
5
The gross margin received by Kresge is the amount received from the participating hotels for a customer's stay.
$ 200
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