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2. Baby Smart Ltd makes and sells baby clothes, cot bedding, play mats suitable for babies up to one year old. These products are sold

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2. Baby Smart Ltd makes and sells baby clothes, cot bedding, play mats suitable for babies up to one year old. These products are sold through two main retail customers, "James Lewis" and "Quality Baby", and about 70 small retailers. The company also sells on-line and to export retailers:- The latest annual income statement is as follows: Baby-smart Ltd wishes to perform a customer profitability analysis. They have analysed their sales into the following customers: James Lewis and Quality Baby are well known retail chains operating in the UK. You discover the following information relating to costs: i) Variable manufacturing costs per product should be allocated on the same percentage of the sales as shown in the income statement, ii) Trade discounts are not offered to overseas buyers and are given to the other customers in the same proportion as the sales of those customers. iii) Salesmens' commission is 1% of sales iv) Fixed manufacturing costs shown in the income statement above should be allocated to customers based on the % of the manufacturing cost per product to the sales value of each product v) Sales and marketing and administration costs should be allocated as follows: James Lewis 20% Quality baby 20% small retailers 25% export retailers 35% Required (a) Provide a customer profitability analysis for the company for the year using the information above. (15 marks) (b) (i) Comment on the information provided by your analysis in (a). (5 marks) (ii) Advise the company on issues which would enable them to negotiate more effectively to retain and improve sales to customers

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