Mountain Distribution has decided to analyze the profitability of five new customers. The company has the following activities:

Activity	Cost Driver Rate
Order taking	$80 per purchase order
Customer visits	$80 per customer visit
Deliveries	$4.00 per delivery mile travelled
Product handling	$0.85 per case sold
Expedited deliveries	$335 per expedited delivery.

It buys bottled water at $12.20 per case and sells to retail customers at a list price of $14.50

per case. Data pertaining to the five customers are:

	Customer
	P	Q	R	S	T
Cases sold	2,160	8,820	60,800	31,900	4,200
List selling price	$14.50	$14.50	$14.50	$14.50	$14.50
Actual selling price	$14.50	$14.22	$13.40	$14.02	$13.02
Number of purchase orders	16	26	34	26	34
Number of customer visits	3	5	8	3	5
Number of deliveries	14	28	64	38	30
Miles travelled per delivery	20	5	4	10	48
Number of expedited deliveries	0	0	0	0	3

Requirement

1.

Compute the customer-level operating income of each of the five retail customers now being examined (P, Q, R, S, and T). Comment on the results.

2.

What insights are gained by reporting both the list selling price and the actual selling price for each customer?

3. What factors should Mountain Distribution consider in deciding whether to drop one or more of the five customers?

Requirement 1. Compute the customer-level operating income of each of the five retail customers now being examined (P, Q, R, S, and T). Comment on the results.

Begin by computing the customer-level operating income of each customer. (Enter all balances including zero balances. Use parentheses or a minus sign when entering operating losses. Round all answers to the nearest whole dollar.)

	Customer
	P	Q	R	S	T
Revenue
Cost of goods sold
Gross profit
Customer-level costs
Customer orders
Customer visits
Delivery vehicle
Product handling
Expedited runs
Customer-level operating income (loss)