Question

Which of the following might result from dropping an unprofitable customer?

A.	Costs could stay the same in the short term

B.	All of the above

C.	Future business relations could suffer

D.	Sales levels would decrease

Answer 1

Answer is B. All of the above

Dropping an unprofitable customer might would result in decrease of sales level. Total sales figure will be affected due to decrease in customer to whom sales are made irrespective of the fact whether that customer is profitable or unprofitable.

A customer may be unprofitable today but it may possible that in future that customer adds more customers to company and become profitable in future.So, dropping an unprofitable customer could result in suffering future business relations.

Certain variable cost may be reduced due to dropping an unprofitable customer but it won't have much impact on cost reduction in short term because fixed cost will remain the same.