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Remington Aeronautics LTD is a British aeronautics subcontract company that designs and manufactures electronic control systems for commercial airlines. The vast majority of all commercial aircraft are manufactured by Boeing in the U.S. and Airbus in Europe; however, there is a relatively small group of companies that manufacture narrow-body commercial jets. Assume for this exercise that Remington does contract work for the two major manufacturers plus three companies in the second tier. Because competition is intense in the industry, Remington has always operated on a fairly thin 20% gross profit margin; hence, it is crucial that it manage nonmanufacturing overhead costs effectively in order to achieve an acceptable net profit margin. With declining profit margins in recent years, Remington Aeronautics CEO, John Remington, has become concerned that the cost of obtaining contracts and maintaining relations with its five major customers may be getting out of hand. You have been hired to conduct a customer profitability analysis. Remington Aeronautics nonmanufacturing overhead consists of $1.60 million of general and administrative (G&A) expense (including, among other expenses, the CEOs salary and bonus and the cost of operating the companys corporate jet) and selling and customer support expenses of $2,520,800 (including 5% sales commissions and $600,800 of additional costs). The accounting staff determined that the $600,800 of additional selling and customer support expenses related to the following four activity cost pools:

		Cost per Unit
Activity	Activity Cost Driver	of Activity
1. Sales visits	Number of visit days	$1,000
2. Product adjustments	Number of adjustments	1,600
3. Phone and email contacts	Number of calls/contacts	100
4. Promotion and entertainment events	Number of events	3,000

Financial and activity data on the five customers follow:

Quantity of Sales and Support Activity
		Gross	Activity	Activity	Activity	Activity
Customer	Sales	Profit	1	2	3	4
A	$15,200,000	$3,040,000	72	8	128	17
B	11,200,000	2,240,000	84	16	160	16
C	4,000,000	800,000	76	14	80	14
D	4,800,000	960,000	24	6	28	10
E	3,200,000	640,000	24	3	20	11
	$38,400,000	$7,680,000	280	47	416	68

In addition to the above, the sales staff used the corporate jet at a cost of $1,000 per hour for trips to customers as follows:

Hours
Customer A	12.80
Customer B	25.60
Customer C	6.40
Customer D	0
Customer E	4.00

The total cost of operating the airplane is included in general and administrative expense; none is included in selling and customer support costs.

Required a. Prepare a customer profitability analysis for Remington Aeronautics that shows the gross profits less all expenses that can reasonably be assigned to the five customers and the net profit percentage for each customer. Note: Round net customer profit percentage to one decimal place (for example, enter 6.4% for .0635555).

	Customer
	A	B	C	D	E
Sales	Answer	Answer	Answer	Answer	Answer
Cost of goods	Answer	Answer	Answer	Answer	Answer
Gross profit	Answer	Answer	Answer	Answer	Answer
Less expenses:
Sales commissions	Answer	Answer	Answer	Answer	Answer
Sales visits	Answer	Answer	Answer	Answer	Answer
Product adjustments	Answer	Answer	Answer	Answer	Answer
Phone and other remote contacts	Answer	Answer	Answer	Answer	Answer
Promotion and entertainment	Answer	Answer	Answer	Answer	Answer
Corporate jet expense	Answer	Answer	Answer	Answer	Answer
Customer profitability	Answer	Answer	Answer	Answer	Answer
Net customer profitability / sales	Answer	Answer	Answer	Answer	Answer

b. Now assuming that the remaining general and administrative costs are assigned to the five customers based on relative sales dollars, calculate profit assigned to each customer and the net profit percentage for each customer. Note: Round net customer profitability in dollars to the nearest whole dollar. Note: Round net customer profit percentage to one decimal place (for example, enter 6.4% for .0635555).

	Customer
	A	B	C	D	E
Net customer profitability in dollars	Answer	Answer	Answer	Answer	Answer
Net customer profitability / sales	Answer	Answer	Answer	Answer	Answer

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