Chapter 14, Problem 14.20E

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:

1. 1. Compute customer-level operating income using the new information that Costa has gathered.

Required

1. 2. Prepare exhibits for IS similar to Figures 14-4 and 14-5. Comment on the results
2. 3. What options should IS consider, with regard to individual customers, in light of the new data and analysis of office overhead?