Oriole Solutions, Inc. is an employment services firm that places both temporary and permanent workers with a variety of clients. Temporary placements account for 70% of Oriole Solutions' revenue; permanent placements provide the remaining 30%. President Gia Johnson recently read an article that discussed the need to consider selling and administrative costs in determining customer profitability-a practice that Oriole Solutions does not follow. Johnson is concerned that the company may be making poor choices in the selection of customers. In the temporary market, Oriole Solutions advertises and searches for workers, hires them, and pays them for the hours they work. The company then bills customers for an amount that is higher than the workers' pay plus employment taxes. Because the temporary market is very competitive, Oriole Solutions has had to reduce the rates charged to customers to keep their business. After reviewing the year's operations, Johnson has determined that the company's customer service activities for the temporary business could be divided into three cost pools: filling work orders, hiring temporary employees, and processing payroll/billing customers. The following table shows the three cost pools and their annual capacity: Total Cost $ 162,400 Cost Pool Filling work orders Hiring temporary employees Processing payroll/billing customers Annual Capacity 3,200 orders 2,700 applicants 180,000 hours worked $ 72,900 45,000 $ Oriole Solutions' largest four customers account for about 52% of total sales, so Johnson has decided to analyze those customers' accounts first to determine how much they are contributing to the bottom line. The gross margin the companies generate and the activities they use are as follows: Chemical Company $466,733 Trailer Manufacturer $145,764 Newspaper Publisher $122,604 Food Processor $167,327 Sales Cost of sales Wages Taxes and fees Total cost of sales Gross margin Temps ordered Applicants Hours worked 341,620 65,366 406,986 $59,747 110,473 24,350 134,823 $10,941 92,205 18,621 110,826 $11,778 120,451 23,411 143,862 $23,465 332 284 22,765 85 76 54 48 15,115 920 794 13,000 47,370 Determine the customer net profit and customer profit margin for each customer. (Round customer net profit to decimal places, eg. 125 and customer profit margin to 1 decimal place, e.g. 15.2%. Enter negative amounts using either a negative sign preceding the number, eg.-45 or parentheses, eg. (45).) Customer net profit Customer profit margin Chemical Company $ % Trailer Manufacturer $ % Newspaper Publisher $ % Food Processor $ %
