Aeronautics Company designs and manufactures electronic control systems for commercial airline. Aeronautics Company does contract work for the two major aircraft makers and three other companies that make the narrow-body commercial jets. This is a very competitive field that Aeronautics Company operates in. It is imperative they manage the non-manufacturing overhead costs effectively in order to achieve an acceptable net profit margin. With declining profit margins in recent years, the CEO has become concerned that the cost of obtaining contracts and maintaining relations with its five customers may be getting out of hand. You have been hired to conduct a customer profitability analysis.

Provide a detailed recommendation to management on what type of actions the company should take as a result of this analysis.In your recommendation you need to specifically identify the different customers, for example Customer 1, from the results of thecustomer profitability analysis.

47 #1 Customer 1 Customer 2 Customer 3 Customer 4 Customer 5 Total 48 Sales $3,000,000 $12,000,000 $3,000,000 $5,000,000 49 Cost of Goods Sold $2,000,000 $25,000,000 $2,460,000 $9,840,000 $2,460,000 $4, 100,000 $1,640,000 50 Gross Profit $20,500,000 $540,000 $2, 160,000 $540,000 $900,000 $360,000 $4,500,000 51 Less Expenses 52 Commission $120,000 $480,000 $120,000 $200,000 $80,000 $1,000,000 53 Sales Visits 137,800 169,000 67,600 44,200 20,800 439,400 54 Product Adjustments 28,750 45,000 12,500 7,500 Phone & Email Contracts 6,250 100,000 55 33,000 53,100 27,000 20,700 15,600 Promotion & Entertainment Events 149,400 56 114,800 92,400 103,600 25,200 14,000 350,000 57 Corporate Jet 21,600 32,400 4.500 0 5,400 Total Expenses 63,900 58 455,950 871,900 335,200 297,600 142,050 2,102,700 59 60 Net Profit $84,050 $1,288, 100 $204,800 $602,400 $217,950 $2,397,300 61 62 Customer Profitability Ratio 2.80% 10.73% 6.83% 12.05% 10.90% 9.59% 63