Answered: why does the customer satisfaction…

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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Ay 2. January sales: $42,000 January contribution margin: $21,000 January customer satisfaction rating: 4.4/5 February sales: $48,000 February contribution margin: $24,000 February customer satisfaction rating: 4.1/5 Industry benchmark suggests that for every 0.1 decline in customer satisfaction, companies like ours will suffer lost contribution of the equivalence of 2% of the previous month's contribution margin, due to poor word of mouth and lower repeated sales. We need to get the customer satisfaction up! By the way, did you know that our contribution margin in January was $21,000 and in February we hit $24,000? We are really gaining momentum here! Based on the industry benchmark, when customer satisfaction decline, the contribution margin also decline. In this case, why does the customer satisfaction rating decline when the contribution margin of the company increase? Please provide calculation

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