Customer profitability, distribution. 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:
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?