This PPT slide, part of the 29-slide Activity Based Costing PowerPoint presentation, presents a detailed analysis of customer profitability through the lens of product profitability data, focusing on three customers: Rick, Ron, and Randy. The table clearly outlines key financial metrics, including total revenue, cost of sales, and customer profit for each individual.

Rick generated a total revenue of $400 with a cost of sales amounting to $227, leading to a customer profit of $173. In contrast, Ron's total revenue is significantly higher at $1,505,, but his cost of sales is also elevated at $1,539, resulting in a customer loss of $34. Randy, with total revenue of $595 and a cost of sales of $433, achieves a customer profit of $162.

The breakdown of costs associated with specific products, namely Gizmo and Gadget, provides further insight. Rick's profitability is driven by a strong performance in both products, while Ron's high cost of sales from the Gadget significantly impacts his overall profitability. Randy's figures suggest a more balanced approach, though still less profitable than Rick.

The slide emphasizes the importance of product profitability data in understanding customer profitability. It indicates that relying solely on overall revenue figures can obscure the true financial picture. The note at the bottom highlights the notable differences in profitability between Rick and Randy, suggesting that a deeper analysis could yield actionable insights for strategic decision-making.

This analysis is crucial for executives aiming to refine their profitability assessments and make informed decisions regarding customer management and product strategies.

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Costing Management Accounting Activity Based Costing