7.1

Quality Supply is a distributor of pharmaceutical products. Its ABC system has five activities: (Click the icon to view the activities.) Rick Flair, the controller of Quality Supply, wants to use this ABC system to examine individual customer profitability within each distribution market. (Click the icon to view additional information.) Read the requirements. Requirements More info 1. Use the ABC information to compute the operating income of each customer in August 2017. Comment on the results and what, if anything, Flair should do. 2. Flair ranks the individual customers in the Ma and Pa single-store distribution market on the basis of monthly operating income. The cumulative operating income of the top 20% of customers is $54,230. Quality Supply reports operating losses of $23,670 for the bottom 40% of its customers. Make four recommendations that you think Quality Supply should consider in light of this new customer-profitability information. He focuses first on the Ma and Pa single-store distribution market. Using only two customers helps highlight the insights available with the ABC approach. Data pertaining to these two customers in August 2017 are as follows: Data table