Aeronautics Company designs and manufactures electronic control systems for commercial airlines. 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. Below is applicable revenue and cost information you should include in your customer profitability analysis. Sales Customer 1 $2,600,000 Customer 2 10,500,000 Customer 3 2,900,000 Customer 4 5,000,000 Customer 5 1,300,000 $22,300,000 Cost of Good Sold (COGS) as a percentage of sales is the following: 82% of Total Sales generated Aeronautics Company selling and customer support team receives the following sales commissions on each customer account: 4% Sales generated per customer The accounting staff determined the additional selling and customer support expenses related to the following four activity cost pools and the cost per activity. Usage of cost driver per customer Activity Activity Cost Driver Data Cost per unit of activity Customer 1 Customer 2 Customer 3 Customer 4 Customer 5 1. Sales Visits Number of visit days $1,200 106 130 52 34 14 2. Product adjustments Number of adjustments 1,100 23 36 10 6 4 3. Phone and email contracts Number of calls/contracts 75 220 354 180 138 100 4. Promotion and entertainment events Number of events 1,500 82 66 74 18 9 In addition to the above, the sales staff used the corporate jet for trips to customers at a cost per hour as stated below and jet hours used per customer as follows: There is a cost of $800 hour Hours used of jet Customer 1 12 Customer 2 26 Customer 3 5 Customer 4 3 Customer 5 4 Required: 1. Develop a customer profitability analysis for Aeronautics Company that shows the sales, cost of goods sold, gross profit on sales, and each cost as a line item that can be assigned to each of the five customers. The customer profitability analysis should show column information for each customer along with a total column for the company. Include the customer profitability ratio for each customer and the company. The customer profitability ratio should be shown in percentage terms taken out to 2 decimal places. Make sure you use cell references to make all your calculations. 2. Provide a detailed recommendation to management on what type of actions the company should take as a result of this analysis in the textbox provided below. In your recommendation you need to specifically identify the different customers. For example, provide information explicitly identifying the results from each customer based on the results of the customer profitability analysis. Provide a discussion of an outside reference other than the textbook on the importance and usage of customer profitability analysis. Make sure you include the reference in APA style. Enter your response in the textbox below. Solution: Make sure you use cell references to make all calculations. 2. Provide a detailed recommendation to management on what type of actions the company should take as a result of this analysis in the textbox provided below. In your recommendation you need to specifically identify the different customers. For example, provide information explicitly identifying the results from each customer based on the results of the customer profitability analysis. Provide a discussion of an outside reference other than the textbook on the importance and usage of customer profitability analysis