The Concord Company recently moved to activity-based costing and implemented customer profitability analysis. In doing so, they found that one of their oldest customers, The Mequon Company, is not profitable. The Mequion Company is small and the management of Concord knows they are very reliant on products from Concord and that they can't absorb a significant increase from Concord, which is needed to make them profitable.

1. What would you recommend if you were part of The Concord Company management team?

2. Because of their long relationship, does The Concord Company have a moral obligation to help them staying in business?