As the owner of a small, entrepreneurial bioengineering firm, you recently received the profitability results for your first year's operations. You were shocked to see that your pre-tax margin was only 6%. Given your industry's high R&D expenses, you need at least double-digit profit margins to stay in business. Until you saw the numbers, you had thought you were consistently hitting your targeted 15% profit margin. Your sales team had been growing the business and building some strong relationships with top-name customers.

Before panicking, you had called a friend who happened to be a supply chain professor. She offered a little help. Her class was discussing activity based costing management (ABCM). She offered to put a field-study team together to analyze individual customer profitability. The results of the customer-profitability analysis follow below.

What are your key takeaways from the refined costing analysis?

What discussions are you going to pursue with 1) your sales team and 2) your customers?

Develop a short script for each of these discussions in preparation for a role play.

	Customer	Sales	Profit Margin	Profits
1	Abbott Laboratories	$100,400	16%	$16,064
2	Actavis Inc	$548,800	12%	$65,856
3	Agilent	$19,600	14%	$2,744
4	Allergan Inc	$29,570	17%	$5,027
5	Amgen Inc	$165	12%	$20
6	Baxter International	$4,373	14%	$612
7	BIOGEN IDEC Inc.	$2,291,000	3%	$68,730
8	Bristol-Myers Squibb	$25,910	9%	$2,332
9	Carefusion	$27,110	15%	$4,067
10	Cerner	$83,740	16%	$13,398
11	Covidien plc	$281,400	16%	$45,024
12	Dentsply International	$1,467	25%	$367
13	Express Scripts	$79,970	15%	$11,996
14	Gilead Sciences	$12,370	14%	$1,732
15	Humana Inc.	$6,256	30%	$1,877
16	Johnson & Johnson	$38,420	10%	$3,842
17	Life Technologies	$198,800	17%	$33,796
18	McKesson Corp.	$1,237,000	-1%	-$12,370
19	Merck & Co.	$242,500	16%	$38,800
20	Patterson Companies	$4,076	25%	$1,019
21	Perrigo	$1,863,000	15%	$279,450
22	Quest Diagnostics	$4,704,000	1%	$47,040
23	St Jude Medical	$39,290	15%	$5,894
24	Tenet Healthcare	$77,140	16%	$12,342
25	United Health Group	$40,000	14%	$5,600
26	Waters Corporation	$13,590	18%	$2,446
27	Zimmer Holdings	$13,500	19%	$2,565
		$11,983,447	6%	$660,269