Save Trees Delivery has decided to analyze the profitability of five new customers. It buys recycled paper at £20 per case and sells to retail customers at a list price of £26 per case. Data pertaining to the five customers are as follows:

Save Trees Delivery’s five activities and their cost drivers are as follows:

Required

1. Compute the customer-level operating income of each of the five retail customers now being examined (1, 2, 3, 4, and 5). Comment on the results.
2. What insights do managers gain by reporting both the list selling price and the actual selling price for each customer?

3. What factors should managers consider in deciding whether to drop one or more of the five customers?

Transcribed Image Text:

Cases sold List selling price Actual selling price Number of purchase orders Number of customer visits Number of deliveries Miles traveled per delivery Number of expedited deliveries 1 1,830 26 26 10 3 12 14 0 2 6,780 26 25.20 18 5 28 40 Customer 3 4 44,500 31,200 26 26 24.30 25.80 35 12 65 80 16 4 25 6 0 5 1,950 26 23.90 35 12 35 45 3