- Required 1. Use the ABC information to compute the operating income of each customer in August. Comment on the results and what, if anything, Flair should do. 2. Flair ranks the individual customers in the mom-and-pop single-store distribution market on the basis of monthly operating income. The cumulative operating income of the top 20% of customers is $64,050. HQ Drugs reports operating losses of $25,820 for the bottom 40% of its customers. Make four recommendations that you think HQ Drugs should consider in light of this new customer profitability information. Activities Activity Area Cost Driver Rate 1. Order processing $42 per order 2. Line-item ordering $5 per line item 3. Store deliveries $55 per store delivery 4. Carton deliveries $2 per carton 5. Shelf-stocking $19 per stocking-hour - Customers' data Callum Pharmacy 12 7 Douglas Pharmacy 8 18 LO 7 Total orders Average line items per order Total store deliveries Average cartons shipped per store delivery Average hours of shelf-stocking per store delivery Average revenue per delivery Average cost of goods sold per delivery 23 20 0.5 0.25 1,900 $ 2,550 $ 2,050 S A 1,700 HQ Drugs Inc. is a distributor of pharmaceutical products. Its ABC system has five activities: (Click the icon to view the activities.) Rick Flair, the controller of HQ Drugs, wants to use this ABC system to examine individual customer profitability within each distribution market. He focuses first on the mom-and-pop single-store distribution market. Two customers are used to exemplify the insights available with the ABC approach. Data pertaining to these two customers in August are as follows: (Click the icon to view the customers' data.) Required Requirement 1. Use the ABC information to compute the operating income of each customer in August. Comment on the results and what, if anything, Flair should do. (Round your answers to the nearest whole dollar. Use parentheses or a minus sign for operating losses.) Callum Pharmacy Douglas Pharmacy Revenues Cost of goods sold Gross margin Operating costs Operating income (loss)