(Customer Profitability Analysis) The following information pertains to lumber sales for the Timber Company for 2012.
|
Boards Sold |
Demand |
Customer-Specific Costs |
|
|
Customer 1 |
122,000 |
140,000 |
$20,000 |
|
Customer 2 |
135,000 |
140,000 |
$20,000 |
|
Customer 3 |
205,000 |
220,000 |
$39,000 |
|
Customer 4 |
105,000 |
120,000 |
$15,000 |
|
Customer 5 |
150,000 |
175,000 |
$28,000 |
The company also has a discount policy in place. If a customer purchases more than 125,000 boards, a discount of $0.50 per board will apply. If a customer purchases in excess of 200,000 boards, a discount of $1.00 per board will apply. The average price per board is $2.50 and the costs to produce each board are $0.50.
- Prepare a report showing the customer profitability for each customer.
- What is the optimal sales mix for the company, considering the demand volumes for each customer?