Jewel Delight is a new company that manufactures custom jewelry. Jewel Delight currently has six customers referenced by customer number: 01, 02, 03, 04, 05, and 06. Besides the costs of making the jewelry, the company has the following activities: 1.Customer orders. The salespeople, designers, and jewelry makers spend time with the customer. The cost driver rate is $46 per hour spent with a customer.

2. Customer fittings. Before the jewelry piece is completed, the customer may come in to make sure it looks right and fits properly. Cost driver rate is $25 per hour.

3. Rush orders. Some customers want their jewelry quickly. The cost driver rate is $100 per rush order.

4. Number of customer return visits. Customers may return jewelry up to 30 days after the pickup of the jewelry to have something refitted or repaired at no charge. The cost driver rate is $30 per return visit.

Customer number	1	2	3	4	5	6
Sales Revenue	$900	$3500	$290	$2200	$4600	$600
Cost of item	$630	$2450	$203	$1540	$3220	$420
Hours spent on customer order	1	7	1	4	25	3
Hours on fittings	0	2	1	0	5	1
Number of rush orders	0	0	1	0	2	0
Number of return visits	0	0	2	0	4	1

Requirement 1. Calculate the customer-level operating income for each customer.

	Customer
	1	2	3	4	5	6
Revenue
Cost of product
Gross profit
Customer-level costs:
Customer orders
Customer fittings
Rush order costs
Returns for repair
Customer-level operating income (loss)

Rank the Customers in order of most to least profitable and prepare a customer-profitability analysis in terms of operating income.

Customer number	Customer-level Oper. Income	Customer Revenue	Customer-Level Oper. Income / Revenue	Cumulative Customer-Level Oper. Income	Cumulative Customer- Level Oper. Income as % of Total - Customer Level Oper. Income

Requirement 2. Are any customers unprofitable? What is causing this? What should Jewel Delights do about these customers? a. Customer 3 and 5 are

b. Customers 6, 3 and 5 are

c. There are no

Unprofitable customers, if there are any, or those who have a ___ (High or low) operating income to revenue percentage, tend to have ___ (High or low) activity levels and/or low revenues. Those customers with a ______ (large or small) number of orders, rush orders, and return visits are usually the customers with the lowest operating income amounts. Jewel Delights could make these customers more profitable by:

1. ___ a. charging a small fee for repairs

b. charging more for rush orders

c. hiring more employees to handle rush orders

d. increasing the selling price

e. paying a vendor to handle repairs

f. requiring a minimum amount of orders for free post-sales service

g. requiring a minimum total revenue for free post-sales service

2. ___ a. charging a small fee for repairs

b. charging more for rush orders

c. hiring more employees to handle rush orders

d. increasing the selling price

e. paying a vendor to handle repairs

f. requiring a minimum amount of orders for free post-sales service

g. requiring a minimum total revenue for free post-sales service

3. ___ a. charging a small fee for repairs

b. charging more for rush orders

c. hiring more employees to handle rush orders

d. increasing the selling price

e. paying a vendor to handle repairs

f. requiring a minimum amount of orders for free post-sales service

g. requiring a minimum total revenue for free post-sales service

4. ___ a. charging a small fee for repairs

b. charging more for rush orders

c. hiring more employees to handle rush orders

d. increasing the selling price

e. paying a vendor to handle repairs

f. requiring a minimum amount of orders for free post-sales service

g. requiring a minimum total revenue for free post-sales service

5. ___ a. charging a small fee for repairs

b. charging more for rush orders

c. hiring more employees to handle rush orders

d. increasing the selling price

e. paying a vendor to handle repairs

f. requiring a minimum amount of orders for free post-sales service

g. requiring a minimum total revenue for free post-sales service

6. ___ a. charging a small fee for repairs

b. charging more for rush orders

c. hiring more employees to handle rush orders

d. increasing the selling price

e. paying a vendor to handle repairs

f. requiring a minimum amount of orders for free post-sales service

g. requiring a minimum total revenue for free post-sales service

Whatever decision it takes, Jewel Delights must also consider the effect the decision might have on ___________ a. The number of hours spent on a customer.

b. The number of rush orders.

c. Total Sales.

Requirement 2. Are any customers unprofitable? What is causing this? What should Jewel Delights do about these customers? unprofitable customer(s). Unprofitable customers, if there are any, or those who have a operating income to revenue percentage, tend to have activity levels and/or low revenues. Those customers with a number of orders, rush orders, and return visits are usually the customers with the lowest operating income amounts. Jewel Delights could make these customers more profitable by: (If a box is not used in the table, leave the box empty; do not select an answer.) Whatever decision it takes, Jewel Delights must also consider the effect the decision might have on Requirement 2. Are any customers unprofitable? What is causing this? What should Jewel Delights do about these customers? unprofitable customer(s). Unprofitable customers, if there are any, or those who have a operating income to revenue percentage, tend to have activity levels and/or low revenues. Those customers with a number of orders, rush orders, and return visits are usually the customers with the lowest operating income amounts. Jewel Delights could make these customers more profitable by: (If a box is not used in the table, leave the box empty; do not select an answer.) Whatever decision it takes, Jewel Delights must also consider the effect the decision might have on Requirement 2. Are any customers unprofitable? What is causing this? What should Jewel Delights do about these customers? unprofitable customer(s). Unprofitable customers, if there are any, or those who have a operating income to revenue percentage, tend to have activity levels and/or low revenues. Those customers with a number of orders, rush orders, and return visits are usually the customers with the lowest operating income amounts. Jewel Delights could make these customers more profitable by: (If a box is not used in the table, leave the box empty; do not select an answer.) Whatever decision it takes, Jewel Delights must also consider the effect the decision might have on Requirement 2. Are any customers unprofitable? What is causing this? What should Jewel Delights do about these customers? unprofitable customer(s). Unprofitable customers, if there are any, or those who have a operating income to revenue percentage, tend to have activity levels and/or low revenues. Those customers with a number of orders, rush orders, and return visits are usually the customers with the lowest operating income amounts. Jewel Delights could make these customers more profitable by: (If a box is not used in the table, leave the box empty; do not select an answer.) Whatever decision it takes, Jewel Delights must also consider the effect the decision might have on