QUESTION C: Customer profitability analysis

Spring Distribution has decided to analyze the profitability of five new customers. It buys bottled water at $$12$ per case and sells to retail customers at a list price of $$14\mathrm{.}40$ per case. Data pertaining to two customers are:

Customer

S T

Cases sold $31,8003,900$

List selling price $$14\mathrm{.}40$ $$14\mathrm{.}40$

Actual selling price $$13\mathrm{.}92$ $$12\mathrm{.}96$

Number of purchase orders $2530$

Number of customer visits $23$

Number of deliveries $4020$

Kilometres traveled per delivery $840$

Number of expedited deliveries $01$

Activity Cost driver rate

Order taking $$100\mathrm{.}00$ Per purchase order

Customer visits $80\mathrm{.}00$ Per customer visit

Deliveries $2\mathrm{.}00$ Per delivery kilometre traveled

Product handling $0\mathrm{.}50$ Per case sold

Expedited deliveries $300\mathrm{.}00$ Per expedited delivery

Required:

$1.$ Compute the customer$-$level operation income for customers S and T only.

Show revenues at list selling price and then report the difference between list selling price and actual selling price as a sales discount.

$2.$ What factors should Spring Distribution consider in deciding whether to drop one of these customers. $($Use pertinent figures from your quantitative analysis in your discussion$)?$