You work as a management accountant in K Ltd$.$ and your company manufactures shoes. They have two types of customers $-$ wholesale and retail. Within wholesale, they have W and H as their primary customer and within retail they have R and T as their primary customer. The CEO of the company Mr$.$ Jose is not sure which customer is profitable as the current marketing director is good with customer relationship but not good with maintaining profit margins. Hence he has asked you to analyse the data from those $4$ customers and provide him with valuable insights.

Details of the daily activity and the cost driver rates

Activity Cost Driver Rate per

Order processing No$.$ of purchase orders $$32$ order

Sales visits No$.$ of customer visits $$125$ visit

Delivery regular No$.$ of regular deliveries $$25$ delivery

Delivery rushed No$.$ of rushed deliveries $$65$ delivery

Customer service calls No$.$ of calls $$35$ call

The selling price set by the management is $ $25$ per shoe and average cost per shoe is $ $18.$ From the $2023$ data, the CEO wants to evaluate the profitability of each of the four customers and explore opportunities to increase profitability of the company in $2024.$ The company's customer service is outsourced and each call takes one hour of service time, hence the charges are very high.

Data from $2023$ Wholesale customer Retail Customer

Items W H R T

Total number of orders $8060210250$

Total number of sales visits $7112019$

Regular deliveries $10501671880$

Average number of shoe per order $4502053227$

Rush deliveries $70104362$

Customer service calls $55601215$

Average selling price per shoe $$19\mathrm{.}5$ $$21\mathrm{.}75$ $$22\mathrm{.}5$ $$21\mathrm{.}5$

Required:

Write a detailed report to Mr$.$ Jose with the following details:

$($i$)$ The customer level operating income and operating income per unit sold.

$($ii$)$ Which customer do you think is most important for the company? Is that customer profitable compared to others? How can we make him more profitable?

$($iii$)$ Which customer is most profitable to the company? What can be done to make him more profitable?

$($iv$)$ Customer T called the CEO and complained that the competitor is selling the same product for $$20$ and he wants a better price or he shall not do business with K Ltd$.$ What would be your recommendation? Would you recommend to drop him? If yes why? If no why? $($its up to you how you substantiate the answer for this one$)$