Customer profitability, service company. Instant Service (IS) repairs printers and pho- tocopiers 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 2010, 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 16-8 and 16-9. 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?

LO1

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Revenues Technician and equipment cost Avery Wizard Grainger Duran Okie Total $260,000 $200,000 $322,000 $122,000 $212,000 $1,116,000 182,000 175,000 225,000 107,000 178,000 867,000 Office overhead allocated 31,859 Operating income $ 46,141 24,507 $ 493 39,457 $ 57,543 14,949 25,978 136,750 $ 51 $ 8,022 $ 112,250