SkinTan’s top five customers generate sales revenue of $950,000

SkinTan’s top five customers generate sales revenue of $950,000 per annum. Each generates a different gross margin as a consequence of price negotiations that have been carried out over several years. Because of their location, each customer incurs different distribution expenses. Sales commissions are paid at the rate of 6% on all sales. Fixed costs are customer specific, covering salaries of sales and office staff who service each customer. The following table shows the information for each of the top customers for the previous year.

Sales

250,000

250,000

200,000

150,000

100,000

Gross margin %

30%

25%

21%

37%

39%

Distribution expenses

30,000

14,000

25,000

12,000

6,000

Fixed costs

30,000

25,000

16,000

15,000

10,000

Carry out a customer profitability analysis and make recommendations in relation to any future strategies SkinTan should take in relation to its top customers.

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