Question

Corley Communications performed a customer profitability analysis and obtained the following results for its bottom five customers:


Chris Corley, vice president for marketing, believes that if these five customers are dropped, the selling expenses required to serve them will be eliminated. Company revenues total
$15,000,000; the current average customer profit margin is 6.8%, and net income is $220,000.

Required

a. Calculate the total customer net profit.
b. What effect would dropping all five customers have on the average customer profit margin?
c. What effect would dropping all five customers have on net income?
d. What action would you recommend?Why?


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  • CreatedFebruary 21, 2014
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