Clark Corporation manufactures cooling system components. The company has gathered the following information about two of its customers: Engle Equipment and Midwest Refrigeration.

Engle Equipment: Sales Revenue $215,000 Cost of goods sold 95,000 General selling costs 30,000 General admin costs 21,000

Midwest Refrigeration: Sales revenue $154,000 cost of goods sold 68,000 general selling costs 21,500 general admin costs 15,050

Cost-driver data used by the firm and traceable to Engle and Midwest are:

Customer Activity              Cost Driver                Pool Rate

Sales activity                     Sales visits                 $900

Order Taking                     Sales orders                  250

Special Handling               units handled                    30

Special Shipping                Shipments                      600

Customer Activity              Engle Equip.                 Midwest Refrig.

Sales Activity                        8 visits                          5 visits

Order taking                        17 orders                      22 orders

Special handling                  600 units                       550 units

Special shipping               19 shipments                  30 shipments

Required:
A. Perform a customer profitability analysis for Clark. Compute the gross margin and operating income on transactions related to Engle Equipment and Midwest Refrigeration.

B. Compute gross margin as a percentage of sales revenue. Then compute (1) general selling and administrative costs as a percentage of gross margin and (2) total customer-related costs (i.e., costs that arise from sales visits, order taking, and special handling and shipping) as a percentage of gross margin.

C. On the basis of your calculations, which of the two customers is "more costly" to deal with? Briefly explain.