Customer profitability, choosing customers. (20-25 minutes) JoursDaim, SA, operates a printing press with a monthly capacity of 2,000 machine hours. Jours-Daim has two main customers, Harpes-a-Gonds, SNC and Fourbe-Riz, SA. Data on each customer for January follow: mlop33

REQUIRED 1. Should Jours-Daim drop the Fourbe-Riz business? If Jours-Daim drops the Fourbe-Riz business, its total fixed costs will decrease by 20%.
2. Fourbe-Riz indicates that it wants Jours-Daim to do an additional EUR 80,000 worth of printing jobs during February. These jobs are identical to the existing business Jours-Daim did for Fourbe-Riz in January in terms of variable costs and machine hours required. Jours-Daim anticipates that the business from Harpes-a-Gonds in February would be the same as that in January. Jours- Daim can choose to accept as much of the Harpes-a-Gonds and Fourbe-Riz business for February as it wants. Assume that total fixed costs for February will be the same as the fixed costs in January. What should Jours-Daim do? What will Jours-Daim’s operating profit be in February?

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HARPES-A-GONDS FOURBE-RIZ TOTAL. Revenues EUR 120,000 EUR 80,000 EUR 200,000 Variable costs 42,000 48,000 90,000 Fixed costs (allocated on the basis of revenues) 60,000 40,000 100,000 Total operating costs 102,000 88,000 190,000 Operating profit EUR 18,000 EUR (8,000) EUR 10,000 Machine hours required 1,500 hours 500 hours. 2,000 hours Each of the following requirements refers only to the preceding data; there is no connection between the requirements.