You have recently been appointed Management Accountant for Alligator Distributors, a Darwin based distributor of skincare and health products including tropical-fruit-based creams and shower scrubs, Aloe Vera ointments and organic-based personal insect sprays. Alligator's activity-based costing (ABC) system focuses on four activities:

Activity Cost driver rate __________________________________________________________________________________________
1. Order processing	$50 per order
2. Product selection	$4 per product
3. Local deliveries (fixed component)	$55 per delivery
4. Local deliveries (variable component)	$5 per kg
__________________________________________________________________________________________

Midge Sand, the owner and Managing Director of Alligator Distributors, has asked you to use the ABC data to examine individual customer profitability in a way that will enable comparison of similar customers operating in the same or different market segments.

After some thought, you decide to start the analysis by examining two customers operating in slightly different market segments. The two customers are Coconut Grove Cosmetics and Hidden Valley Healthcare.

Both are about 1 hour's drive from the centre of Darwin and are therefore considered to be local customers. The two customers service similar size suburban communities. Data relating to the two customers is as follows:

Average Monthly Activity over the past 6 months	Coconut Grove Cosmetics	Hidden Valley Healthcare
_________________________________________________________________________________________
Total orders	15	12
Average number of products per order	10	20
Total deliveries for the period	8	12
Average delivery size (kgs)	24	22
Average revenue per delivery	$4,800	$3,600
Average cost of goods sold per delivery	$4,200	$3,400
__________________________________________________________________________________________

Required:

(a) Use the above data to calculate the operating income for each of the customers for the period.

(b) Discuss the performance of each customer and compare their results. Based on your findings, identify and explain what you consider to be the main issues that Midge should be aware of.