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Figure Four is a distributor of pharmaceutical products. Its ABC system has five activities: : Rick Flair, the controller of Figure Four, wants to use
Figure Four is a distributor of pharmaceutical products. Its ABC system has five activities: : Rick Flair, the controller of Figure Four, wants to use this ABC system to examine individual (Click the icon to view the activities.) customer profitability within each distribution market. whole dollar. Use parentheses or a minus sign for operating losses.) has a lower gross margin percentage and consumes resources to obtain this lower margin. information. 1. Pay attention to the top 20% of the customers. 2. Work out ways internally at Figure Four to the rate per cost driver. 3. Work with customers so that their behavior the total "system-wide" costs. 4. Offer salespeople bonuses based on the of each customer rather than the gross margin of each customer. Data table More info 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: Requirements 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 $55,680. Figure Four reports operating losses of $28,550 for the bottom 40% of its customers. Make four recommendations that you think Figure Four should consider in light of this new customer-profitability information
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