The management of XYZ Ltd has agreed to work with the following profitability calculations for its main distribution channels.

XYZ Ltd

Market Segment Profitability Analysis

General

Supermarket

Department

Chain Stores

Chemists

Sales

$228,475,000

$30,192,000

$51,420,000

Less: rebate

$205,628

$45,288

$5,142

Net Sales

$228,269,373

$30,146,712

$51,414,858

Less Cost of Goods sold

$205,731,240

$27,169,920

$45,892,350

Gross Margin

$22,538,133

$2,976,792

$5,522,508

9.86%

9.86%

10.74%

Less: Cost to Serve

Customer purchase order processing

$119,250

$45,000

$427,500

Customer store delivery

$197,600

$76,800

$685,600

Cartons dispatched to customer stores

$622,624

$69,805

$99,705

Customer order amendments

$28,481

$37,975

$83,544

In store promotions

$59,122

$7,813

$13,306

Total cost to serve

$1,027,077

$237,393

$1,309,655

Net profit

$21,511,055

$2,739,399

$4,212,853

9.4%

9.1%

8.2%

Required:

Based on the customer profitability information provided here, prepare a 1-page memo to XYZ Ltd management outlining the key insights that can be drawn from the customer segment profitability analysis. At a minimum, you should

Succinctly state the key findings about the relative profitability of customer segments and their contribution to overall profitability.

Briefly describe any issues impacting the calculations, how they might be resolved, and their impact on the results.

Make recommendations about how each segment should be managed to improve future profitability.