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Qualhy supply inc. is a distibutor of pharmaceufical products. Ita ABC system has five activities: fetict tho ion to virw the metfitiest distribution market. Two
Qualhy supply inc. is a distibutor of pharmaceufical products. Ita ABC system has five activities: fetict tho ion to virw the metfitiest distribution market. Two customors are used to oxemolfy the insights avalable with the ABC approach. Data pertaining to these two customers in Aogust are as follows: [C.ex the loch to view the caistomers' data)] nesarest whole dollar, Uso porentheses or a minus sipa for oporating losses) has a lower gross margin persentage and consimes resources fo obtain this lower margin this new custamer profitabity information. Ways Qualoy Supply could use this informasion include the following: 1. Pay attention to the top 20% of the customen. 2. Work out ways inlernally at Quality Supply to the rate per cost driver 3. Whik with cushomers so that their behaviour the totit "svistim widte" costs Activities Customers' data 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 $64,050. Quality Supply reports operating losses of $27,060 for the bottom 40% of its customers. Make four recommendations that you think Quality Supply should consider in light of this new customer profitability information
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