1. Prepare a customer profitability analysis for these customers.

Albany Pharmacy Dallas Pharmacy

Sales revenue 16,800 19,800
Cost of goods sold 14,700 17,050
Gross margin 2,100 2,750
Less Operating Costs
Order processing 484 528
Line-item ordering 132 504
Store deliveries 350 550
Carton deliveries 805 1,210
Shelf-stocking 21 66
Total Operating Costs 1,792 2,858
Net Operating Income 308 -108

2. Are is
There any customers
Dallas unprofitable?
Pharmacy Whatdue
has unprofitable is causing this? What
to total operaing costshould the controller
higher than of HQ
gross margin. ThePharmacy
controller do?
of HQ Pharmacy
should focus more on Dallas Pharmacy
Meanwhile, HQ Pharmacy reports operating losses of $18,290 for the bottom 40% of its customers.
Make 2 recommendations that you think HQ Pharmacy should consider in light of this new customer-profitability infor
The two recommendations are provided as below:
1) Pay incentives
Additional to sales
discounts may berepresentatives/agents based on the
provided to top 20% customers profitability
to generate of the customers.
additional business from them.
This would reduce the need to depend on bottom 40% customers for more sales and also the risk of negative results
roller of HQ
s margin. ThePharmacy
controller do?
of HQ Pharmacy.
% of its customers.
of this new customer-profitability information (0.5 point)

siness from them.

also the risk of negative results