Customer profitability, distribution. Spring Distribution has decided to analyze the profitability of another five customers (see pp. 640-648). It buys bottled water at $0.50 per bottle and sells to wholesale customers at a list price of $0.60 per bottle. Data pertaining to five customers are as follows:

Customer P Q R S T Bottles sold 50,000 210,000 1,460,000 764,000 94,000 List selling price $0.60 $0.60 $0.60 $0.60 $0.60 Actual selling price $0.59 $0.58 $0.54 $0.57 $0.53 Number of purchase orders 15 25 30 25 30 Number ofsales visits 2 4 6 2 3 Number of deliveries 10 30 60 40 20 Kilometres travelled per delivery 14 4 3 8 40 Number of hot-hot runs 0 0 0 0 1 Its five activity areas and their cost drivers are:

Activity Area Cost Driver and Rate Order taking Sales visits Delivery vehicles Product handling Hot-hot runs

$100 per purchase order

$80 per sales visit

$2 per delivery kilometre travelled

$0.02 per bottle sold

$300 per hot-hot run Required 1. Compute the operating income of each of the five customers now being examined (P, Q, R, S, and T). Comment on the results.
2. What insights are gained by reporting both the list selling price and the actual selling price for each customer?
3. What factors should Spring Distribution consider in deciding whether to drop one or more of customers P, Q, R, S, or T?