Grand Online Mall (GOM) is an online retailer that sells many different products. GOM offers its customers two options for shipping. First, the "Regular" program charges a flat fee of $10.40 per order within its shipping area. The second ("Elite") program charges customers $100 annually and includes free, regular shipping. The average cost to GOM of shipping an order is $8. In addition to the included shipping, Elite customers also receive a rebate of 5 percent on the sales value of the merchandise purchased for the year. GOM earns an average 30 percent gross margin on its sales, excluding shipping costs and any shipping fees.

Information on the sales to the two customer groups for the most recent year follow:

Customer Costs	Total	Elite	Regular
Number of customers	85,000	17,000	68,000
Average customer sales value per order		$ 40	$ 85
Average number of orders annually		12	4

Required:

A. What is the profitability per customer for each category of customer (Elite and Regular)?

B.Which customers are more profitable on a per-customer basis?

C.The company is revising the rebate policy for Elite customers and is thinking of raising the rebate percentage. Assuming all other behavior (number of orders, the average value of an order, and so on) remains the same, what rebate percentage for the Elite customers would result in profitability for the two categories of customers be the same?

A.

What is the profitability per customer for each category of customer (Elite and Regular)?

Note: Round your "revenue over cost per customer" answers to 2 decimal places.

	Elite	regular
total gross margin
order fees
shipping costs
rebates
customer profitability
excess of revenue over cost per customer

B. Which customers are more profitable on a per-customer basis?

Which customers are more profitable on a per-customer basis?

C.

The company is revising the rebate policy for Elite customers and is thinking of raising the rebate percentage. Assuming all other behavior (number of orders, average value of an order, and so on) remains the same, what rebate percentage for the Elite customers would result in profitability for the two categories of customers be the same?

Note: Round your answer to 2 decimal places (i.e., .0321 = 3.21)

Rebate percentage for elite customers

%