=+9-16 KK Customer profitability, customer-cost hierarchy OBJECTIVE 8 Omega Electronics has only two retail and two wholesale customers. Information relating to each customer for 2014 follows

(in thousands):

130 125 118 000 90 000

1 000 650 40 000 580 000 5 500 2 300 100 000 500 1

2 3

4 5

6 7

8 9

A B C D E Australia wholesaler wholesaler stereo market Revenues at list price 420 000 $ $ 130 000 $

Discounts from list prices 30 000 7 000 Cost of goods sold 325 000 455 000 stsoc yrevileD 054 200 Order processing costs 800 200 Costs of sales visits 5 600 1 350 Wholesale customers Retail customers

$

New Zealand Down Under World Omega’s annual distribution-channel costs are $38 million for wholesale customers and $7 million for retail customers. Its annual organisation-sustaining costs, such as salary for top management and general administration costs, are $65 million. There is no cause-and-effect or benefits-received relationship between any cost-allocation base and organisation-sustaining costs. That is, organisation-sustaining costs could be saved only if Omega Electronics were to shut down completely.

Required 1 Calculate customer-level operating profit using the format in Figure 9-2.