Valiente Company makes equipment for three major customers. As part of its ABC and ABM project, the following customer profitability report for 2022 was prepared.

Other facts:                
Customer C has successfully negotiated significant volume sales discounts.    
Commissions are paid to salespeople on gross total sales.                
Because Customer C buys the most, salespeople often go to the production area and demand that Customer C’s order be prioritized. In addition, Customer C often requests that the company expedite (pay extra shipping) for earlier delivery. Production has complained about the disruptions that Customer C’s demands create.

a. Rank the customers in terms of true profitability. Analyze the results, and discuss sales terms, returns, expediting orders, billing and payments, and service.
b. Should the company compensate the salespeople on some basis other than gross total sales? Discuss.
c. If you were a manager at Valiente, which changes in processes and procedures would you consider as a result of this customer profitability report?

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Valiente Customer Profitability Report for 2022 Sales Less: Sales discounts and returns Net sales Cost of goods sold Gross margin % Gross margin of sales Customer costs Order taking and order processing Delivery costs (excluding expediting) Other: expediting costs for delivery and restocking costs for returned items Post-sales service visits Billing and collection costs Net customer profit % Net customer profit of sales Customer A Customer B Customer C $200,000 (25,000) 175,000 (94,000) 81,000 40.5% (5,000) (1,100) (100) (250) (50) $74,500 37.3% $600,000 (42,000) 558,000 (400,000) 158,000 26.3% (11,000) (2,000) (700) (430) (70) $143,800 24.0% $900,000 (154,000) 746,000 (580,000) 166,000 18.4% (17,000) (4,000) (5,450) (820) (130) $138,600 15.4%