Mini Case - Carey Restaurant Supply Justin is the Cost Accountant for Carey Restaurant Supply (CRS). Sara, the CRS Sales Manager, and Justin are meeting to discuss the profitability of one of the customers, Donnelly's Pizza. Justin shares the following with Sara regarding Donnelly's: Sara looks at the report and says, "I'm glad to see all of my hard work is paying off with Donnelly's. Sales are up 10% over the last quarter!" Justin replies, "Increased sales are great, but I'm worried about Donnelly's margin. We were actually showing a profit at the lower sales level, but now there's a loss. Gross Margin percentage this quarter was 40%; down 5% from the previous quarter. I am afraid that corporate will push hard to drop them as a customer if things don't turn around." "That's crazy," says Sara. "A lot of that overhead for things like order processing, deliveries and sales calls would just be allocated to other customers if we dropped Donnelly's. This report makes it look like we are losing money on them when we're not. In any case, you can do something to make Donnelly's profitability look closer to what we think it is. No one doubts Donnelly is a great customer!" 1. Assume Sara is partially correct in her assessment of the report. Upon further investigation, it is determined that 10% of the order processing costs and 20% of the delivery costs would not be avoidable if Donnelly were dropped as a customer. Would CRS benefit from dropping them? Show calculations. 2. Sara's bonus is based on sales targets. Based on the preceding information regarding gross margin percentage, what might Sara have done last quarter to meet her target and receive her bonus? How might CRS revise its bonus system to address this? 3. Should Justin rework the numbers? How should he respond to Sara's comments about making Donnelly look more profitable