Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Ray Panneton, president of Okus Designs, met with his CFO and vice president of marketing to discuss the profitability of the company's top 10 customers.
Ray Panneton, president of Okus Designs, met with his CFO and vice president of marketing to discuss the profitability of the company's top 10 customers. These customers account for 80% of the company's revenues. The following table was prepared by the accounting department to assist Ray in his decision making. Customer Meredith's Boutique Stewart Industries T&P Incorporated Talley Design Studios UPPtown Productions O'Brien's Tavern House of Claire Copper Metalworks J Floral Designs Old Main Masonry Total/Average Revenues $ 4,958,000 4,899,000 4,505,000 4,204,000 4,110,000 3,903,000 3,852,000 3,709,000 3,630,000 3,503,000 $41,273,000 Cost of Sales $3,750,000 3,618,600 3,400,000 3,192,000 2,870,000 2,850,000 2,887,500 2,664,000 2,501,250 2,485,000 $30,218,350 Selling Costs $ 760,000 925,000 1,080,500 1,130,000 902,000 875,000 685,000 1,350,000 1,486,250 770,000 $9,963,750 Customer Net Profit 448,000 355,400 24,500 (118,000) 338,000 178,000 279,500 (305,000) (357,500) 248,000 1,090,900 Customer Profit Margin 9.0% 7.3% 0.5% (2.8%) 8.2% 4.6% 7.3% (8.2%) (9.8%) 7.1% 2.6% Ray is concerned about the customers with negative customer profit margins. If these customers are dropped, what will be the new total customer net profit and customer profit margin (assume the cost of sales and selling costs can be eliminated)? (Round customer profit margin to 1 decimal place, e.g. 15.2%.) Customer net profit $ Customer profit margin %
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started