Question: Green Paper Delivery has decided to analyze
Green Paper 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: 
Green Paper Delivery’s five activities and their cost drivers are: Activity………………………………………………….Cost-Driver Rate Order taking…………………………………$90 per purchase order Customer visits…………………………....$75 per customer visit Deliveries……………………………$3 per delivery mile traveled Product handling………………………..…….$1.20 per case sold Expedited deliveries……………$250 per expedited delivery 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?
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Customer 2 3 4 5 1,830 $26 $26 Cases sold 6,780 31,200 1,950 44,500 $26 List selling price Actual selling price Number of purchase orders Number of customer visits $26 $26 $26 $25.20 $24.30 $25.80 $23.90 10 18 35 16 35 3 12 4 12 Number of deliveries Miles traveled per delivery Number of expedited deliveries 12 28 65 25 35 14 4 8 6 45 3
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