Spring Distribution has decided to analyse the profitability of another five customers. It buys bottled water at €0.50 per bottle and sells to wholesale customers at a list price of €0.60 per bottle. Data pertaining to five customers are:

Required

1 Calculate the operating profit of each of the five 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 Spring Distribution consider in deciding whether to drop one or more of customers P, Q, R, S or T?

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Customer P R S T Bottles sold 50 000 210 000 1 460 000 764 000 94 000 List selling price 0.60 0.60 0.60 0.60 0.60 Actual selling price 0.60 0.59 0.55 0.58 0.54 Number of purchase orders 15 25 30 25 30 Number of sales visits 2 4 6 2 3 Number of deliveries 10 30 60 40 20 Kilometres travelled per delivery 14 4 Number of expedited deliveries 0 0 30 80 20 40 1 Its five activity areas and their cost drivers are: Activity area Order taking Sales visits Delivery vehicles Product handling Expedited deliveries Cost driver and rate 100 per purchase order 80 per sales visit 2 per delivery kilometre travelled 0.02 per bottle sold 300 per expedited delivery