Patrick 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:
$\begin{array}{llll}&\text { product } 1&\text { product } 2&\text { product } 3\
\text { Sales } & \$ 5,000 & \$ 6,000 & \$ 30,000 \
\text { Cost of goods sold } & \underline{4,000} & \underline{4,800} & \underline{15,000} \
\text { Gross margin }&\$1,000&\$1,200&\$15,000
\end{array}$
$\begin{array}{lll}&\text { Customer type 1 }&\text { Customer type 2 }\
\text { Product 1 Sales } & \$ 500 & \$ 4,500 \
\text { Product 2 Sales } & \$ 1,000 & \$ 5,000 \
\text { Product 3 Sales } & \$ 16,000 & \$ 14,000 \
\text { Manager visits } & 4 & 16
\end{array}$
What is the gross profit margin for all three products for Customer Type 2?
A) $450
B) $1,000
C) $7,000
D) $8,900

Question

Quizplus · Accepted Answer

The gross profit margin for all three products for Customer Type 2 can be calculated by adding the gross margins for each product sold to Customer Type 2. The gross margin for each product is given as: Product 1: $1,000, Product 2: $1,200, and Product 3: $15,000. To find the gross profit margin for Customer Type 2, we need to calculate the proportion of sales for each product to Customer Type 2 and then apply these proportions to the gross margins.For Product 1 sold to Customer Type 2: ($4,500 / $5,000) * $1,000 = $900For Product 2 sold to Customer Type 2: ($5,000 / $6,000) * $1,200 = $1,000For Product 3 sold to Customer Type 2: ($14,000 / $30,000) * $15,000 = $7,000Adding these amounts together gives us the gross profit margin for Customer Type 2: $900 + $1,000 + $7,000 = $8,900.

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