Write A Report To Louise Fairbern Relating Customer Costs, Customer Profitability, Distribution Channel Profitability And Total Profitability.

Customer Profitability

Write A Report To Louise Fairbern Relating Customer Costs, Customer Profitability, Distribution Channel Profitability And Total Profitability. Support The Report With The Analyses You Have Prepared And Recommend Courses Of Action To Louise.

Louise Fairbern operates Interiors by Louise, an interior design consulting and window treatment fabrication business.

Her business is made up of two different distribution channels: a consulting business in which Louise serves two architecture firms (Adams and Betz), and a commercial window treatment business in which Louise designs and constructs window treatments for three commercial clients (Chatham, Dedham and Elm).

Louise wishes to evaluate the profitability of her two architecture-firm clients and three commercial window treatment clients, as well as evaluate the profitability of each of the two channels and the business as a whole. Information relating to the most recent quarter is:

Adams         Betz          Chatham       Dedham         Elm

Gross Revenue   $234 000     $188 800   $357 380      $147 840      $73 200

Direct Costs        147 000         117 200      218 400        115 720          57 040

The total overhead costs are $340 400. Louise estimates that 25% of her overhead costs relate directly to her architectural business, 40% directly to her window-treatment business, and the remainder are general in nature.

On the revenues above, Louise gave a 10% discount to Adams to lure this customer from a competitor and gave a 5% discount to Elm for advance payment in cash.

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