The systematic evaluation and reporting of revenues generated and the related costs incurred from serving customers is known as ___________?
Show answer Hide answer
Answer: C. customer profitability analysis
Explanation
Customer profitability analysis evaluates both the revenues earned from specific customers and the associated costs incurred to serve them. This systematic review helps businesses identify which customer relationships are genuinely profitable and which consume excess resources. It supports strategic decision-making regarding client management and pricing. This analysis often leverages activity-based costing to trace indirect customer-servicing expenses, such as specialized packaging or frequent order changes, to individual accounts. By subtracting these costs from gross customer revenues, accountants determine net customer profitability. Companies often find that a small percentage of clients generate the majority of net income.
Firms use customer profitability insights to restructure service agreements, eliminate unprofitable discounts, or dedicate more resources to top-tier clients. For instance, discovering that a high-volume client requires costly custom support can prompt a price renegotiation. This practice protects overall profit margins and optimizes operational efficiency. Partial productivity analysis evaluates single-input efficiency rather than overall customer revenue and cost matching. Treasury cost analysis and customer cost analysis cover financial management or only half the profit equation by omitting customer revenues.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
Related questions
Q1. A method where general ledger amounts are updated by applying actual cost rates is defined as __________?
Show answer Hide answer
Answer: B. adjusted allocation rate approach
The adjusted allocation rate approach updates general ledger amounts by replacing budgeted allocation rates with actual cost rates at the end of the accounting period. This ensures that all financial statements reflect t...
Q2. An investigation of historical data across consecutive time periods relating to a specific facility, activity, or company is known as ___________?
Show answer Hide answer
Answer: C. time series
Time series analysis examines historical data collected over successive, equally spaced time periods for a specific facility, activity, or company. By identifying underlying patterns such as trends, seasonality, and cycl...
Q3. What method is used to select a capacity level when there is zero opening inventory __________?
Show answer Hide answer
Answer: A. write off variance approach
The write off variance approach is used to select and evaluate a capacity level when there is zero opening inventory in the accounting period. Because no beginning inventory carries over, any production volume variance i...
Q4. A cost estimation technique that categorizes accounts into fixed and variable components for a given level of production is called _____________?
Show answer Hide answer
Answer: D. account analysis method
The account analysis method evaluates individual general ledger accounts to classify them as fixed or variable. Experienced cost analysts review each expense account based on past knowledge and expected production behavi...
Q5. What is the method called where overallocated or underallocated overhead is distributed among the ending balances, including finished goods control ___________?
Show answer Hide answer
Answer: C. proration approach
Proration distributes over-allocated or under-allocated overhead balances across work in process, finished goods, and cost of goods sold. This accounting treatment ensures that financial statements reflect more accurate...
Q6. The requirement that a linear relationship must exist between the independent and dependent variables is the assumption of __________?
Show answer Hide answer
Answer: B. relevant range of linearity
The relevant range of linearity assumes a straight line relationship between independent and dependent variables. This assumption holds true only within a specific, bounded span of operating activity and volume levels. O...