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:
- 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.
- What insights do managers gain by reporting both the list selling price and the actual selling price for each customer?
- What factors should managers consider in deciding whether to drop one or more of the five customers?
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