Aqua Distributors Activity

Part 1: Customer Profitability

Aqua Distribution buys bottled water at $12 per case and sells it to retail clients. Data pertaining to four customers is as follows:

	Williams	Perez	Schmidt
Cases Sold	62,000	32,000	4,000
Actual price per case	$13.20	$13.80	$12.95
Number of orders	30	25	30
Customer Visits	6	2	3
Deliveries	60	40	20
Miles per Delivery	3	8	40

The firm estimates the following rates:

Number of orders	$200 per order
Customer Visits	$120 per visit
Delivery	$2 per delivery mile traveled
Product Handling	$.50 per case sold

Required:

1.) Evaluate customer profitability and suggest ways that Aqua might improve its profitability. Use excel for all your calculations.

Part 2: Segment Profitability

Aqua Distributions has 2 locations one in Des Moines and one in Kansas City. Information relating to the locations is detailed below.

	Aqua Distributions	Des Moines	Kansas City
Revenue	$2,000,000	$1,200,000	$800,000
Variable Costs	$1,460,000	$900,000	$560,000
Contribution Margin	$540,000	$300,000	$240,000
Traceable Fixed Costs	$180,000	$70,000	$110,000
Segment Margin	$360,000	$230,000	$130,000
Common Fixed Costs	$200,000
Net Operating Income	$160,000

1.) Aqua believes they can increase sales in the Des Moines market next year by $300,000. Prepare a new segmented income statement. Assume cost behaviors and fixed costs will remain the same.

2.) Calculate the companywide break-even point.

3.) Calculate the break-even point for the Kansas City location.

4.) Calculate the break-even point for the Des Moines location.