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Based on the above data answer the following questions

4. (a). In order to limit losses and potentially make profits, which of the following strategies should be implemented by DOP?

1. DOP should offer discounts to encourage customers to order electronically
2. DOP should charge an additional order processing fee from customers who place small and more frequent orders in order to incentivize them to place large orders
3. DOP should charge a certain level of interest rate for accounts receivables longer than a threshold period, say 30 days
4. All of the above

4. (b). In relation to the costs incurred by DOP, which activity accounts for the biggest absolute difference between Customer A and Customer B?

1. Shipping cartons (commercial freight)
2. Shipping cartons (desktop delivery)
3. Processing orders (manual)
4. Entering line items (manual orders)

4. (c). How much interest rate (per annum) should DOP charge from Customer B on the account receivables of $30,000 in order to achieve a profit of $0 (ceteris paribus)?

1. 1.6%
2. 8.4%
3. 10%
4. None of the above

4. (d). What will be the profit for DOP from Customer B if all its cartons are shipped via commercial freight?

1. $0
2. $5200
3. $2680
4. $300

4. (e). The per unit cost of processing EDI orders divided by the per unit cost of processing orders manually is ______________

1. 10%
2. 50%
3. 100%
4. 200%

4. (f). What will be the profit from Customer A if DOP is not incurring any interest cost on its account receivables?

1. $480
2. $4270
3. $5170
4. $6070

We now compute the customer profitability Customer A Sales $ 103,000 Cost of items purchased 85,000 Gross margin $ 18,000 Number of cartons ordered 200 10,400 Number of cartons shipped commercial freight 200 1,200 Number of desktop deliveries Number of orders, manual 60 Number of line items, manual 60 240 orders Number of EDI orders 6 30 Average Accounts Receivable $ 9,000 900 Customer Contribution (Loss) $ 5,170 Customer 8 $ 104,000 85,000 $ 19,000 200 10,400 150 900 25 5,500 100 1,000 180 720 $ 30,000 3.000 $ (2,520) 30%

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