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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:
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?

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:
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?


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?

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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3.99

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