Instant Service (IS) repairs printers and photo copiers for five multisite companies in a tri-city 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 2013, IS reported the following results:
Tina Sherman, 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. Compute customer-level operating income using the new information that Sherman has gathered.
2. Prepare exhibits for IS similar to Exhibits 16-10 and 16-12. 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?

  • CreatedJuly 31, 2015
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