Representative Large Annual Data Company (500 firms)

ENE TAGS MUNDOS E OM ONGSTS DOM CA Mp gst eersn ev soonscecsugaednscasuctaaencmalncrc asaeahssensmoetnetateergaensne s 2,000 Average sales value Of SUPPLIES Per OLE ........c...c:cccscenssveesevesevessesssesesnececsveesensesseceseneess $600 Average cost of supplies to Corporate Express as a percentage of Sales... 80%

[MAC OLOCES SIMO ICOSUOS ONGS Mia mencr esac tee merge aes chcoeaane essen ror a ae mente tee $40 Average delivery cost per order as a percentage Of SAl€S........ ccc cccsecesseceessstersseeeensnees 5%

Average cost to maintain Internet access per CUStOMEr PEF VEAP... ccc eccseceseseeeeeees $ 2,000 Marketing management, average NOUurs Per CUSTOMER .........:00:cccccsceecsssssensssecneesssrseeenens 100 Marketing management, total annual cost (25 employees, 2,000 hours per year).......... $ 1,250,000 ACVeTismaiancd promolonr totallanttial COStiec.cccecs cece. .c-

You are unsure how to trace advertising and promotion, electronic catalogue, and general and administrative costs but suggest allocating advertising and promotion on a per customer basis. Individually or in small groups, prepare a visual and verbal presentation that explains the required items.

Required

a. Compute the annual profit generated from an average large and small company.

b. If your analysis is correct, is it a worthwhile use of scarce capacity to add 10 small customers rather than one large customer? Why or why not?

c. Can you recommend possible ways to make small-customer business attractive to Corporate Express?

d. What improvements in tracing costs do you recommend?