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Market Segment Sales Gross Margin Gross Margin Percentage

Big Box Segment $$11,124,000\mathrm{.}00$ $$3,924,000\mathrm{.}0035\mathrm{.}28\%$

Retail Pharmacy Segment $$9,450,000\mathrm{.}00$ $$3,450,000\mathrm{.}0036\mathrm{.}51\%$

Independent Stores Segment $$5,940,000\mathrm{.}00$ $$2,340,000\mathrm{.}0039\mathrm{.}39\%$Allocation Rate $0\mathrm{.}0538$

Column$1$ Big Box Segment Retail Pharmacy Segment Independent Store Segment Total

Sales $$11,124,000\mathrm{.}00$ $$9,450,000\mathrm{.}00$ $$5,940,000\mathrm{.}00$ $$26,514,000\mathrm{.}00$

Cost of Goods Sold $$7,200,000\mathrm{.}00$ $$6,000,000\mathrm{.}00$ $$3,600,000\mathrm{.}00$ $$16,800,000\mathrm{.}00$

Gross Margin $$3,924,000\mathrm{.}00$ $$3,450,000\mathrm{.}00$ $$2,340,000\mathrm{.}00$ $$9,714,000\mathrm{.}00$

Operating Costs $$387,102\mathrm{.}86$ $$322,585\mathrm{.}71$ $$193,551\mathrm{.}43$ $$903,240\mathrm{.}00$

Operating Income $$3,536,897\mathrm{.}14$ $$3,127,414\mathrm{.}29$ $$2,146,448\mathrm{.}57$ $$8,810,760\mathrm{.}00$ABC Costing

Activity Driver Big Box Segment Retail Pharmacy Segment Independent Stores Segment Total Operating Costs Total Allocation Rate

Processing Orders Number of purchase orders by customers $$280\mathrm{.}00$ $$720\mathrm{.}00$ $$3,000\mathrm{.}00$ $$240,000\mathrm{.}00$ $$4,000\mathrm{.}0060$

Processing Product Lines Number of product lines ordered by customers $$3,920\mathrm{.}00$ $$8,640\mathrm{.}00$ $$30,000\mathrm{.}00$ $$191,520\mathrm{.}00$ $$42,560\mathrm{.}004\mathrm{.}5$

Delivering to Stores Number of deliveries to stores $$240\mathrm{.}00$ $$720\mathrm{.}00$ $$2,000\mathrm{.}00$ $$213,000\mathrm{.}00$ $$2,960\mathrm{.}0072$

Shipping Boxes to Stores Number of boxes shipped to stores $$72,000\mathrm{.}00$ $$48,000\mathrm{.}00$ $$32,000\mathrm{.}00$ $$228,000\mathrm{.}00$ $$152,000\mathrm{.}001\mathrm{.}5$

Stocking Store Shelves Hours to stock store shelves $$720\mathrm{.}00$ $$360\mathrm{.}00$ $$200\mathrm{.}00$ $$30,720\mathrm{.}00$ $$1,280\mathrm{.}0024$

Big Box Segment

Activity Operating Costs

Processing Orders $$16,800\mathrm{.}00$

Processing Product Lines $$17,640\mathrm{.}00$

Delivering to Stores $$17,280\mathrm{.}00$

Shipping Boxes to Stores $$108,000\mathrm{.}00$

Stocking Store Shelves $$17,280\mathrm{.}00$

Retail Pharmacy Segment

Activity Operating Costs

Processing Orders $$43,200\mathrm{.}00$

Processing Product Lines $$38,880\mathrm{.}00$

Delivering to Stores $$51,840\mathrm{.}00$

Shipping Boxes to Stores $$72,000\mathrm{.}00$

Stocking Store Shelves $$8,640\mathrm{.}00$

Independent Stores Segment

Activity Operation Costs

Processing Orders $$180,000\mathrm{.}00$

Processing Product Lines $$135,000\mathrm{.}00$

Delivering to Stores $$144,000\mathrm{.}00$

Shipping Boxes to Stores $$48,000\mathrm{.}00$

Stocking Store Shelves $$4,800\mathrm{.}00$

Items Big Box Segment Retail Pharmacy Segment Independent Stores Segment

Gross Margin $$3,924,000\mathrm{.}00$ $$3,450,000\mathrm{.}00$ $$2,340,000\mathrm{.}00$

Total Operating Costs $$177,000\mathrm{.}00$ $$214,560\mathrm{.}00$ $$511,800\mathrm{.}00$

Total Operating Income $$3,747,000\mathrm{.}00$ $$3,235,440\mathrm{.}00$ $$1,828,200\mathrm{.}00$ Based on all of the data you were provided and your analyses, what insights have you gained

on the profitability of each market segment? Based on your analyses in the above questions,

provide recommendations to Rory to help improve the profitability of Stars Hollow. Be

specific and note the benefits, costs and potential risks to the recommendations that you are

proposing.

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