Ive looked at some numbers on several of our accounts. I can confirm that Thirst Quenchers Corp is one of our lowest-margin customers. Look at this report (see Exhibit 1). Manuella noted that it is hard to trace our customer service cost to any particular customer. Our customer service costs are about 10% of the net revenue. To make things easy, it has been the companys practice to allocate customer service costs to each customer based on its share of the companys total net revenues. If a customer accounts for 3% of our net revenue, then we allocate that customer 3% of our customer service costs. Then we calculate a customer margin for each customer.

Exhibit 1:

Report of customer profitability for the 4 largest customers of New Farm Organics for the previous accounting year.

4 largest customers

Particulars	Thirst Quenchers Corp	Pesco Ltd	Morrison's Retail	6 to Ten Stores	Total for New Farm Organics
Net revenues ($)	1,168,800	1,192,800	121,440	454,500	12,000,000
Cost of goods sold ($)	1,020,000	1,020,000	102,000	382,500	10,200,000
Gross profit ($)	148,800	172,800	19,440	72,000	1,800,000
Customer service costs ($)	116,880	119,280	12,144	45,450	1,200,000
Operating profit ($)	31,920	53,520	7,296	26,550	600,000
Operating profit (% of net revenue)	2.73%	4.49%	6.01%	5.84%	5.00%

Exhibit 3:

Email sent by Manuella on the 19^th of April 2023 Dear colleagues,

I hope you are well.

Following our recent meeting, Ive gathered necessary information on customer service costs by searching through the accounting records. The following table summarises the customer service costs by area of activity for the last accounting year.

Activity	Cost ($)
Product handling	672,000
Taking customer orders	100,000
Deliveries (standard)	140,000
Deliveries (expedited)	198,000
Sales visits to customers	90,000
Total	1,200,000

Ive also met with a few colleagues individually to understand and determine some of the factors which drive customer support costs. The product handling costs seem to vary with the number of bottles sold. Timothy checked the delivery records and has informed me that the delivery vans had travelled a total of 100,000 kilometres for making standard deliveries. While the cost per standard delivery varies based on the number of kilometres, the cost incurred per expedited delivery is the same irrespective of the number of kilometres travelled per delivery.

Please provide detailed calculations.

I hope this information is helpful for you to prepare for our next meeting on the 27^th of April 2023