Question: Instant Service (IS) repairs printers and
Instant Service (IS) repairs printers and photocopiers for five multisite companies in a tristate area. IS’s costs consist of the cost of technicians and equipment that are directly traceable to the customer site and a pool of office overhead. Until recently, IS estimated customer profitability by allocating the office overhead to each customer based on share of revenues. For 2017, IS reported the following results:
Abby Costa, IS’s new controller, notes that office overhead is more than 10% of total costs, so she spends a couple of weeks analyzing the consumption of office overhead resources by customers. She collects the following information:
Required:
1. Compute customer-level operating income using the new information that Costa has gathered. 2. Prepare exhibits for IS similar to Exhibits 14-4 and 14-5. Comment on the results.
3. What options should IS consider, with regard to individual customers, in light of the new data and analysis of office overhead?
Transcribed Image Text:
Home Insert Page Layout Formulas Data Review View A B D E G Wizard Grainger $390,000 $300,000 $483,000 || $183,000 || $318,000 $1,674,000 337,500 Avery Okie Duran Total 1. 2 Revenues 3 Technician and equipment cost 4 Office overhead allocated 5 Operating income 273,000 47,789 $ 69,211 $ 262,500 36,760 160,500 1,300,500 205,125 77 $ 12,033 $ 168,375 267,000 38,967 59,186 22,423 740 $ 86,314 $ Home Insert Page Layout Formulas Data Review I K Activity Area 2 Service call handling 3 Parts ordering 4 Billing and collection Cost Driver Rate $85 per service call $80 per Web-based parts order $50 per bill (or reminder) Home Insert Page Layout Formulas Data Review View A В C E F Avery Okie Wizard Grainger Duran 225 8 9 Number of service calls 10 Number of Web-based parts orders 11 Number of bills (or reminders) 360 60 180 270 180 315 90 225 225 45 135 135 90 180
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