Variable Costing

Customer Profitiablilty

SMC Inc. makes flavored coffess. They are sold at gift shops and grocery stores. SMC packages its coffee in 1lb bags and 1/4 bags. the 1/4 bags are sold only in the gift sets of 4 coffee flavors. Grocery stores purchase the coffee in the 1lb bags. Gift shops purchase usally both the 1 lb bags and the gift sets.

sales and cost data for the SMC coffees are :

1 lb bag Gift set

Sales price 8.00 10.00

Variable manufacturing cost 2.00 3.50

Variable promotion cost 2.50 1.50

Units sold to grocery stores 200,000 0

Units sold to gift shops 25,000 50,000

Analyze the profitablity of SMC customers