ve per 1,000 Gold customers and one full-time customer representative per 10,000 Silver customers. Customer representatives receive salaries plus bonuses of 10 percent of customer gross margin. SkiBlu spends 90 percent of its promotion costs on Gold customers to encourage their loyalty.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
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Chapter1: Financial Statements And Business Decisions
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Problem 10-58 (Algo) Customer Profitability (LO 10-4)

SkiBlu, Ltd., divides its customers into Gold customers and Silver customers. The company has one full-time customer representative per 1,000 Gold customers and one full-time customer representative per 10,000 Silver customers. Customer representatives receive salaries plus bonuses of 10 percent of customer gross margin. SkiBlu spends 90 percent of its promotion costs on Gold customers to encourage their loyalty.

 

Customer Costs Total Gold Silver
Number of customers   121,000     41,000     80,000  
Average customer representative salary       $ 81,000   $ 81,000  
Promotion costs $ 5,000,000              
Average gross margin per customer       $ 715   $ 320  
 

 

Required:

a. Calculate the totals of the items below for both gold and silver customers, as well as the excess of gross margin over customer costs for each category.

b. Which customers are more profitable?

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