Final answer:
The correct option is E). Hewshaw Machines, Inc. lost 10% of its 32,000 customer accounts, and with an average revenue loss of $8,000 per account and a profit margin of 5%, the company lost $1,280,000 due to this attrition.
Step-by-step explanation:
To calculate how much Hewshaw Machines, Inc. lost due to the attrition of customer accounts, we need to first determine the number of accounts lost and the revenue lost per account, then calculate the total revenue loss and finally the loss in profits.
The company lost 10% of its 32,000 customer accounts, so the number of accounts lost is:
32,000 accounts * 10% = 3,200 accounts lost
The average revenue lost per account is $8,000, so the total lost revenue is:
3,200 accounts * $8,000/account = $25,600,000 total revenue lost
Since the company's profit margin is 5%, we calculate the loss in profits by applying the profit margin to the total revenue lost:
$25,600,000 * 5% = $1,280,000 loss in profits due to attrition
Therefore, the answer is E. $1,280,000.