Instant Service (IS) repairs printers and photocopiers for five multisite companies in a tri-city area. IS's costs

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Instant Service (IS) repairs printers and photocopiers 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 2015, IS reported the following results:
Instant Service (IS) repairs printers and photocopiers for five multisite

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:
Activity Area Cost Driver Rate
Service-call handling ........................... $75 per service call
Parts ordering ........................... 80 per web-based parts order
Billing and collection .................... 50 per bill (or reminder)
Customer database maintenance ............... 10 per service call

Instant Service (IS) repairs printers and photocopiers for five multisite

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 16-11 . 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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Cost Accounting A Managerial Emphasis

ISBN: 978-0133138443

7th Canadian Edition

Authors: Srikant M. Datar, Madhav V. Rajan, Charles T. Horngren, Louis Beaubien, Chris Graham

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