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Original Paper Delivery has decided to analyze the profitability of five new customers. It buys recycled paper at $13 per case and sells to retail customers at a list price of $18 per case. Data pertaining to the five customers are as follows:

Customer

1 2 3 4 5

Cases sold 2,050 8,820 45,000 34,700 2,350

List selling price $18 $18 $18 $18 $18

Actual selling price $18 $17.65 $15.40 $17.46 $16.53

Number of purchase orders 13 23 36 12 41

Number of customer visits 3 2 13 2 10

Number of deliveries 15 33 66 21 41

Miles traveled per delivery 15 8 9 10 41

Number of expedited deliveries 0 0 0 0 1

Original Paper Delivery's five activities and their cost drivers are:

Activity	Cost Driver Rate
Order taking	$150 per purchase order
Customer visits	$80 per customer visit
Deliveries	$2 per delivery mile traveled
Product handling	$0.80 per case sold
Expedited deliveries	$320 per expedited delivery

Requirements

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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