Windy City Design Company specializes in designing commercial office space in Chicago. The firm€™s president recently reviewed the following income statement and noticed that operating profits were below her expectations. She had a hunch that certain customers were not profitable for the company and asked the controller to perform a customer-profitability analysis showing profitability by customer for the month of October.
WINDY CITY DESIGN COMPANY
Income Statement
For the Month Ended October 31
Sales revenue.......................................................................... $300,000
Cost of services billed............................................................ 255,000
Gross margin.......................................................................... $ 45,000
Marketing and administrative costs....................................... 30,000
Operating income................................................................... $ 15,000
The controller provided the following customer-profitability graph:

Required:
Put yourself in the position of Windy City€™s controller and write a memo to the president to accompany the customer-profitability graph. Comment on the implications of the customer-profitability analysis and raise four or more questions that should be addressed by the firm€™s managementteam.

Transcribed Image Text:

WINDY CITY DESIGN COMPANY Customer-Profitability Graph For the Month Ended October 31 $$8,000 8,000 7,000 6,000 5,000 E 4,000 8 3,000 2,000 S 1,000 $5,500 $4,500 $4,000 6 Customer number -1,000 -2,000 -3,000 -4,000 -5,000 -$2,000 -$5,000