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1. Customer profitability analysis helps management see the overall financial picture
for each customer and how management can use this information to help establish a
strategic plan for the coming periods.
True False
£300,000-£90,000 = £210,000
£250,000-£210,000 = £40,000
5. Assume that, due to excess demand, Chelsea is able to raise the selling price on Main
Man Robot 10%. To achieve a return of 30% of total revenues, Chelsea's monthly
cost reduction in pounds will need to be:
(a) £0 - the increased sales eliminate the need for cost reduction
(b) £19,000
(c) £25,000
(d) £33,000
£250,000-£231,000 = £19,000
8. Activity-Based Costing evaluates the costs and values of process activities to identify
opportunities for improved efficiency.
True False
9. Target cost is the selling price assigned to a product or service that allows the
company to achieve a desired gross profit level.
True False
Target cost is the highest cost of good or service that meets both customer needs
and company profit goals.