A whale curve is a brilliantly simple, but effective line chart, plotting the percentage of cumulative profit on the y-axis and the percentage of customers ranked by profitability (most to least) on the x-axis. The ensuing whale curve visual provides
an easy-and-quick-to-understand picture of customer profitability
.
What is whale curve?
Whale Curves are
graphical representations of the concentration of firms’ profits
, usually plotting cumulative profits against cumulative products ranked by profitability. … This illustrates the impact of complexity costs on firm profitability.
Why is customer profitability analysis a vitally important topic to managers customer profitability analysis?
Why is customer-profitability analysis an important topic for managers? … It
helps managers to see whether customers who contribute sizably to total profitability are receiving a comparable level of attention from the organization
.
What is a profitability curve?
Profit curves are
useful for profitability analysis
. For example, a population dimension, such as Customers or Products, displays along the x-axis in descending order by profit yields. … The y-axis shows cumulative values for the account dimension, such as Profit.
How can managers gain insight into the causes of a sales volume variance by subdividing the components of this variance?
How can managers gain insight into the causes of a sales-volume variance by subdividing the components of this variance? A. Managers can
gain substantial insight
into the sales volume variance by subdividing it into the sale-mix variance and the sales quantity variance.
How do you make a whale curve?
In order to create the curve you need
to rank your customers from most profitable to least profitable (with negative profit or loss)
. The resulting curve shows the cumulative profit (your overall profit) as each customer is added to the curve.
How do you calculate cost to serve?
Calculating Your Cost to Serve
The traditional methodology is to use an
Excel model to estimate the average cost for each process, then multiply that cost by the transaction volume
. The average is usually determined using an estimated labor standard.
Why would a manager perform customer profitability analysis?
Measuring customer profitability is crucially important for continued business success because it helps determine whether certain customers are
costing you money
rather than making you money. … You may find that a customer group you thought was the most important is actually of lower value to your company than others.
Should a company allocate its corporate costs to divisions?
Divisions. Businesses are divided up in a number of ways; the company may be organized by geographical location, product line or function. … The variety of types of divisions is one reason why
a company shouldn’t allocate all its costs to divisions
, because the divisions could have shortfalls or unexpected costs.
What criteria might be used to justify cost allocation decisions?
The four criteria used to guide cost allocation decisions are: A
. Fairness or equity, cause and effect, ability to bear, employee satisfaction
B. Ability tobear, cause andeffect, fairness orequity, benefits receivedThis is the correct answer.
What is cumulative net profit?
Cumulative Net Profit means
the cumulative amount as of the end of any month of System Revenue minus the Lost Parking Meter Revenue
, minus all Sponsorship Administrative Fees, minus the Operations Fees.
What is a sales volume variance?
The sales volume variance is
the difference between the actual and expected number of units sold, multiplied by the budgeted price per unit
. The formula is: (Actual units sold – Budgeted units sold) x Budgeted price per unit. = Sales volume variance.
What does sales quantity variance show?
(4) A sales quantity variance indicates
the effect on profit of selling a different total quantity from the budgeted total quantity
. … (a) The difference between actual sales volume in the standard mix and budgeted sales valued at the standard profit per unit.
What is a good food cost percentage?
Restaurant owners typically set an ideal food cost percentage based on a number of factors, including their other expenses for labor and rent. Many restaurants aim to keep food costs
between 28 and 35% of their revenue
.
Do operating costs include salaries?
Operating expenses are the necessary costs associated with running a business and include things such as
employee salaries
, buildings and utilities, tools, materials and equipment, and marketing costs.
Why is it important to understand cost to serve?
Knowing the cost to serve of each customer gives
companies better visibility
on those customers who are positively contributing to the bottom line and those who aren’t, and enables them to make informed choices in order to transform unprofitable customers into profitable ones.
