Secure Data provides onsite data storage and server management services for five multisite companies in a tristate area. Secure Datas costs consist of the cost

Secure Data provides onsite data storage and server management services for five multisite companies in a tristate area. Secure Data’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, Secure Data estimated customer profitability by allocating the office overhead to each customer based on revenues. For 2012, Secure Data reported the following results:

Todd Burns, Secure Data’s new controller, notes that office overhead is more than 10% of total costs, so he spends a couple of weeks analyzing the consumption of office overhead resources by customers. He collects the following information:

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

2. Prepare exhibits for Secure Data similar to Exhibits 7- 8 and 7- 9. Comment on the results.

3. What options should Secure Data consider for individual customers in light of the new data and analysis of officeoverhead?

Manning Decker Thomas Bailey Willis Total $320,000 $185,000 $338,000 $115,000 $221,000 Revenues Technician and equipment cost 224,000 Office Overhead allocated Operating income 161,800 22,360 $ 840 236,180 40,852 60,567 100,500 13,899 $601 $1,179,000 185,500 907.980 $142,500 128,520 38,677 26,711 $ 57,323 8,789 Manning Decker Thomas Bailey Willis 190 140 130 140 160 25 240 190 85 135 140 75 Number of service calls Number of Web-based parts orders Number of bills (or reminders) Activity Area Service call handling Parts ordering Billing and collection 45 70 85 Cost Driver Rate $82 per service call $90 per Web-based parts ordered $45 per bill