Instant Service (IS) repairs printers and photocopiers for five multisite companies in a tristate area. ISs costs

Question:

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 2013, IS reported the following results:

Home Insert Page Layout A 1 2 Revenues 3 Technician and equipment cost 4 Office overhead allocated 5

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:

Home Home Insert Activity Area Page Layout 1 2 Service call handling 3 Parts ordering 4 Billing and

1. Compute customer-level operating income using the new information that Sherman has gathered.
2. Prepare exhibits for IS similar to Exhibits 14-4 and 14-5. 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?

Exhibit 14-4:
1 234567BSPHEG 8 9 10 11 12 13 Home Insert A Retail Customer Code B A C D F J E G H I Total Page Layout B