Measuring customer profitability using traditional approach The Monroe Paper Company supplies newsprint paper to three newspaper companies. One is a large metropolitan paper, the other is a small city daily paper, and the other is a regional weekly newspaper. All receive the same quality of newsprint, but they purchase in significantly different amounts.

During the year Monroe Paper Company sold $4,000,000 of newsprint. Seventy-five percent was sold to Big City Newspaper, 17.5 percent was sold to Small City Newspaper, and 7.5 percent was sold to Weekly Newspaper. In total, $395,000 of discounts were given to customers. Cost of goods sold averaged 60 percent of newsprint gross sales revenue. Marketing costs totaled $120,000, distribution costs were $445,000, and customer service costs were $80,000. The company uses sales value to allocate costs when preparing customer profitability reports.

Transcribed Image Text:

REQUIRED Prepare a traditional customer profitability report for Monroe Paper Company newsprint custom- ers.