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:

REQUIRED
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?

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Avery Okie Wizard Grainger Dura Total $260,000 $200,000 $322,000 S122,000 $212,000 S1,116,000 Revenues Technician and Office overhead Operating income S 46,141 493 57,543 51 S 8,022 112,250 equipment cost 182,000 175,000 225,000 107,000 178,000 867,000 allocated 31,859 24,507 39,457 14,949 25,978 136,750 Activity Area Cost Driver Rate Service-call handling Parts ordering Billing and collection Customer database maintenance $75 per service call 80 per web-based parts order $50 per bill (or reminder) S10 per service call Avery Okie Wizard Grainger Number of service calls Number of web-based parts orders Number of bills (or reminders) 150 120 30 240 210 90 40 60 90 120 150 60 180 150 120