Generic Inc. is a distributor of pharmaceutical products. Its ABC system has five activities: LO 2 4 1. Order processing costs for Chapelville Pharmacy, $400 LO 1 4 1. Total customer revenue is $13,980 Activity Area Cost Driver Rate for the Year 1. Order processing $40 per order 2. Line-item ordering 3 per line item 3. Store deliveries 50 per store delivery 4. Carton deliveries 1 per carton 5. Shelf-stocking 16 per stocking-hour Rick Flair, the controller of Generic, wants to use this ABC system to examine individual customer profitability within each distribution market. He focuses first on the mom-and-pop single-store distribution market. Two customers are used to exemplify the insights available with the ABC approach. Data pertaining to these two customers in August are as follows: Charlesville Pharmacy Chapelville Pharmacy Total orders 13 10 Average line items per order 9 18 Total store deliveries 7 10 Average cartons shipped per store delivery 22 20 Average hours of shelf-stocking per store delivery 0 0.5 Average revenue per delivery $2,400 $1,800 Average cost of goods sold per delivery $2,100 $1,650 Required 1. Use the ABC information to compute the operating income of each customer in August. Comment on the results and what, if anything, Flair should do. 2. Flair ranks the individual customers in the mom-and-pop single-store distribution market on the basis of monthly operating income. The cumulative operating income of the top 20% of customers is $55,680. Generic reports operating losses of $21,247 for the bottom 40% of its customers. Make four recommendations that you think Generic should consider in light of this new customer profitability information.

Your calculations of the operating income of each customer in August (use the ABC information provided in the question). Provide your comment on the results and what, if anything, Flair should do.

Flair ranks the individual customers in the mom-and-pop single-store distribution market on the basis of monthly operating income. The cumulative operating income of the top 20% of customers is $55,680. Generic reports operating losses of $21,247 for the bottom 40% of its customers. Make 4 (four) recommendations that you think Generic should consider in light of this new customer profitability information.