Thomas Industries, Inc. is a distributor of industrial supplies. The company has been in business since 1968 and has experienced various levels of profitability throughout its history. The company has recently struggled through a couple of unprofitable years despite having increased its customer base by 30% over the previous three years. Management is concerned that the company may be giving away the store to attract new customers and increase its market share. Consequently, management is interested in instituting an activity-based costing system to assist in the analysis of individual customer profitability.

1. Analyze each of the individual customers and make recommendations for how TII should deal with the customer.

Kendall Manufacturing Slidell Company Murdoch Enterprises Sales Cost of goods sold Gross margin Operating expenses $ 322,500 215,000 $ 107,500 S 126,000 84,000 42,000 $ 63,000 42,000 $ 21,000 Driver Driver rate Driver quantity $ 1,216.90 $ 1,083.57 $411.11 Driver quantity Driver quantity 16 19,470 4,334 2,467 10 12,169 3,251 822 3,360 78 # of sales calls Negotiation hours # of orders Cost of goods sold # of line items # of new customers $ 13,000.00 Pounds shipped Training hours Support hours Sales dollars Total operating expenses Operating income 14 $ 17,037 6,501 822 3 2 6,720 $42,000 12 4 2 8.0%) $ 215,000, 17,200 $ 84,000 6.52 6 20 130 46 13,000 1,721 4,321 4,658 4,788 $59,613 $ (17,613) 1,870 4 12 673 786 1,553 3.8%) 322,500 , 12,255 126,000 , 4,788 | 63,000 2,394 $25,086 $ (4,086) 14,210 5,116 1,571 5,434 4,780 $ 196.39 $ 129.39 42 36 4788 63,000 $67,978 $ 39,522 Operating income as a percentage of sales 12.3% -1 4.0% -6.5%