Managers use a customer-profitability analysis report to ensure that ________.
A) unpaid invoices are categorized according to age by due date
B) costs related to customers are segmented into different cost pools on the basis of different types of cost drivers or cost-allocation bases
C) customers making large contributions to the operating income of a company receive a high level of attention from the company
D) cost allocation of indirect cost is in place

Question

Quizplus · Accepted Answer

A customer-profitability analysis report helps managers identify and prioritize customers who make significant contributions to the operating income of the company. These customers receive a high level of attention and service from the company to maintain their loyalty and increase their profitability. Option A is incorrect because categorizing unpaid invoices by due date is related to accounting and cash flow management, not customer profitability analysis. Option B is incorrect because although cost segmentation is part of customer profitability analysis, it is not the main purpose of such a report. Option D is also incorrect because cost allocation of indirect cost is a more general concept that is not specific to customer profitability analysis.

Managers Use a Customer-Profitability Analysis Report to Ensure That ________