Exercise 14-22                                                                                                                                                                                  

Given:                                                                                                                                                                                  

Figure Four is a distributor of pharmaceutical products.  Its ABC system has 5 activities.                                                                                                                                                                                 

Rick Flair, the controller of Figure Four, wants to use this ABC system to examine individual                                                                                                                                                                                        

customer profitability within each distribution market.  He focuses first on the Ma and Pa                                                                                                                                                                                            

single-store distribution market.  Two customers are used to exemplify the insights available                                                                                                                                                                                    

with the ABC approach.  Data pertaining to these two customers in August 2012 are as                                                                                                                                                                                  

follows:               

the basis of monthly operating income.  The cumulative operating income of the top 20%                                                                                                                                                                           

of customers is $55,680.  Figure Four reports negative operating income of $21,247 for the                                                                                                                                                                          

bottom 40% of its customers.                                                                                                                                                                    

Make four recommendations that you think Figure Four should consider                                                                                                                                                                             

in light of this new customer-profitability information.