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Unformatted text preview: o 80% of profits come from 20% of customers c10d469159acce7ccb49a0fb8bcee976a75749ca.doc PAGE 1 OF 2 ACCT 250 – ACCOUNTING FOR DECISION MAKING NOTES – CHAPTER 5B SPRING 2008 o 20% of customers are actually unprofitable a) Customer types b) How do we do it? • Use ABC as we’ve learned it to calculate the cost of product sold to customer • Extend ABC to period costs – determine costs of serving customer • Calculate customer profit: Sales less ABC COGS less: ABC service costs • Robust example on pages 139 to 141 c) Why do it? • Identify profitable customers • Identify unprofitable customers • Customer life-time value (CLV) c10d469159acce7ccb49a0fb8bcee976a75749ca.doc PAGE 2 OF 2...
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- Spring '08
- Decision Making, Customer Profitability Analysis, DECISION MAKING NOTES