Gomez Company makes three types of products.The company has two types of customers.The cost to serve all customers is $12,000 and is allocated to customer types based on the number of manager visits to customer locations.The following data are available:
$\begin{array}{llll}&\text { Product } 1&\text { Product } 2&\text { Product } 3\
\text { Sales } & \$ 5,000 & \$ 6,000 & \$ 30,000 \
\text { Cost of goods sold } & \underline{4,000} & \underline{4,800} & \underline{15,000} \
\text { Gross margin }&\$1,000&\$1,200&\$15,000
\end{array}$
$\begin{array}{lll}&\text { Customer type } 1&\text { Customer type } 2\
\text { Product } 1 \text { Sales } & \$ 500 & \$ 4,500 \
\text { Product 2 Sales } & \$ 1,000 & \$ 5,000 \
\text { Product 3 Sales } & \$ 16,000 & \$ 14,000 \
\text { Manager visits } & 4 & 16
\end{array}$
What is the gross profit margin for all three products for Customer Type 1?
A) $8,000
B) $8,200
C) $8,250
D) $8,300

Question

Quizplus · Accepted Answer

The gross profit margin for all three products for Customer Type 1 is calculated by first determining the gross profit for each product sold to Customer Type 1 and then subtracting the allocated cost to serve Customer Type 1.1. Calculate the gross profit for each product sold to Customer Type 1:   - Product 1: $500 sales - ($4,000/ $5,000 sales * $500 sales) = $500 - $400 = $100   - Product 2: $1,000 sales - ($4,800 / $6,000 sales * $1,000 sales) = $1,000 - $800 = $200   - Product 3: $16,000 sales - ($15,000 / $30,000 sales * $16,000 sales) = $16,000 - $8,000 = $8,0002. Sum of gross profit for Customer Type 1: $100 + $200 + $8,000 = $8,3003. The cost to serve all customers is $12,000, allocated based on the number of manager visits. Customer Type 1 had 4 visits out of a total of 20 visits (4 for Customer Type 1 + 16 for Customer Type 2), so the allocated cost for Customer Type 1 is $12,000 * (4/20) = $2,400. However, the question asks for the gross profit margin, not the net profit after allocating the serving cost. Therefore, the allocated cost is not subtracted from the gross profit in this calculation.The gross profit margin for all three products for Customer Type 1 is $8,300.

Gomez Company Makes Three Types of Products What Is the Gross Profit Margin for All Three Products