Customer profitability, customer-cost hierarchy. Orsack Electronics has only two retail and two wholesale customers. Information relating to each customer for 2012 follows (in thousands):

Orsack??s annual distribution-channel costs are $34 million for wholesale customers and $5 million for retail customers. Its annual corporate-sustaining costs, such as salary for top management and general administration costs, are $61 million. There is no cause-and-effect or benefits-received relationship between any cost-allocation base and corporate-sustaining costs. That is, corporate-sustaining costs could be saved only if Orsack Electronics were to completely shut down.Required1. Calculate customer-level operating income using the format in Exhibit 14-5.2. Prepare a customer-cost hierarchy report, using the format in Exhibit 14-6.3. Orsack??s management decides to allocate all corporate-sustaining costs to distribution channels: $48 million to the wholesale channel and $13 million to the retail channel. As a result, distribution channel costs are now $82 million ($34 million + $48 million) for the wholesale channel and $18 million ($5 million + $13 million) for the retail channel. Calculate the distribution-channel-level operating income. On the basis of these calculations, what actions, if any, should Orsack??s managers take?Explain.

Wholesale Customers Retail Customers World North America South America Big Sam Wholesaler Wholesaler Market $150,000 $115,000 $115,000 520 Stereo Revenues at list price Discounts from list prices Cost of goods sold Delivery costs Order processing costs Costs of sales visits $550,000 $435.000 7,200 123,000 220 175 330,000 475 750 475,000 84,000 130 690 1,020 2,500 120 1,400 5,400 2,500