Question

A financial analyst for Simon Manufacturing prepared the following​ report:

Customers

Customerminus−

Level Operating Income

Customer Revenue

A

$ 5 comma 563.00$5,563.00

​$26,250

B

$ 4 comma 474.00$4,474.00

​$30,000

C

$ 3 comma 851.00$3,851.00

​$15,000

D

$ 1 comma 049.50$1,049.50

​$7,300

E

​$984.80

​$5,100

F

​$844.80

​$4,400

G

​$336.60

​$1,800

H

​$252.00

​$4,500

I

​($168.00)

​$2,400

J

​($676.00)

​$2,600

Which of the following conclusions can be drawn from the​report?

A.The cumulative

customerminus−level

operating income of the top eight customers represents about

105.1105.1​%

of operating income

B.

Customer B has the second highest operating income margin

C.

All profitable customers achieve customer level operating income in excess of​ 20%

D.

All customers provide positive contribution towards profitability

Answer 1

Answer: A.The cumulative customerminus−level operating income of the top eight customers represents about 105.1105.1​% of operating income

Step-by-step explanation:

The Cumulative total of the first 8 customers is,

= 5,563 + 4,474 + 3,851 + 1,049.5 + 984.80 + 844.80 + 336.60 + 252.00

= $17,355.70

The Cumulative total of the Operating Income is,

= 5,563 + 4,474 + 3,851 + 1,049.5 + 984.80 + 844.80 + 336.60 + 252.00 - 168 - 676

= $16,511.70

Dividing both figures gives,

= 17,355.70 / 16,511.70 * 100

= 1.0511051 * 100

= 105.1105.1​%

Option A is therefore correct.