=+9-19 KK Customer profitability, distribution OBJECTIVE 10 Crystal Distribution has decided to analyse the profitability of five new customers (see pp. 355–358). It buys bottled water at $12 per case and sells to retail customers at a list price of $14.40 per case. Data pertaining to the five customers are:

Customer P Q R S T Cases sold 2 080 8 750 60 800 31 800 3 900 List selling price $14.40 $14.40 $14.40 $14.40 $14.40 Actual selling price $14.40 $14.16 $13.20 $13.92 $12.96 Number of purchase orders 15 25 30 25 30 Number of customer visits 2 3 6 2 3 Number of deliveries 10 30 60 40 20 Kilometres travelled per delivery 14 4 3 8 40 Number of expedited deliveries 0 0 0 0 1 366 Chapter 9: Pricing decisions and customer-profitability analysis M09_HORN3377_02_LT_C09.indd 366 2/09/13 3:45 PM Its five activities and their cost drivers are:

Activity Cost-driver rate Order taking $100 per purchase order Customer visits $80 per customer visit Deliveries $2 per delivery kilometre travelled Product handling $0.50 per case sold Expedited deliveries $300 per expedited delivery Required 1 Calculate the customer-level operating profit of each of the five retail customers now being examined (P, Q, R, S and T). Comment on the results.