14-20 Customer profitability, service company. 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: Activity Area Cost Driver Rate Service call handling $85.00 Per service call Parts ordering $80.00 per Web-based parts order Billing and collection $50.00 per bill (or reminder) Avery Okie Wizard Grainger Duran Number of service calls 225 360 60 180 270 Number of web-based parts orders 180 315 90 225 225 Number of bills (or reminders) 45 135 135 90 180 1. Compute customer-level operating income using the new information that Costa has gathered. 2. Prepare exhibits for IS and 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?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
14-20 Customer profitability, service company. 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
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:
Activity Area Cost Driver Rate
Service call handling $85.00 Per service call
Parts ordering $80.00 per Web-based parts order
Billing and collection $50.00 per bill (or reminder)
Avery Okie Wizard Grainger Duran
Number of service calls 225 360 60 180 270
Number of web-based parts orders 180 315 90 225 225
Number of bills (or reminders) 45 135 135 90 180
1. Compute customer-level operating income using the new information that Costa has gathered.
2. Prepare exhibits for IS and 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?
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
