Star Manufacturing makes a component called V2. Its customers are manufacturing firms. It offers a volume discount to some customers and currently, its salespeople decide whether an order is large enough to qualify for the discount. If the component needs to be exchanged or repaired, customers can come back within 10 days for free exchange or repair.

Information about Stars four biggest customers follows:

Customer	A	B	C	D
Revenues	$ 931,500	$ 621,000	$ 550,000	$ 207,000
Discount	27,945	140,000	15,000	45,000
Cost of goods sold	605,475	403,650	357,500	134,550
Gross Profit	298,080	77,350	177,500	27,450
Customer-related costs
Order taking	2,880	3,000	7,000	3,000
Product handling	6,064	10,000	14,000	10,000
Rush order processing	560	1,000	10,000	7,000
Exchange and repair	700	700	10,000	10,000
Profit	287,876	62,650	136,500	(2,550)

Please note:

Order taking costs may include: receipts of inquiries, preparing quotations and processing orders. Product handling costs may include: stock maintenance, warehousing, and orders dispatch.

Required:

1. What is the profitability profile of each customer? (2 marks)
2. Based on your customer profitability profiles, should Star make any changes to the ways they allow customers A, B and C use their resources. If yes, what changes should Star implement, if not why not? (8 marks)

3. Should Star discontinue supplying to customer D? Why or why not? (4 marks)
4. Is Stars discount policy appropriate? Why or why not? (3 marks)