Speedy Service repairs printers and photocopiers for five multisite companies in a tristate area. Speedy’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, Speedy estimated customer profitability by allocating the office overhead to each customer based on share of revenues.

For 2017, Speedy reported the following results:

Tina Patel, Speedy’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:

1. Compute customer-level operating income using the new information that Patel has gathered.
2. Prepare exhibits for Speedy similar to Exhibits 14-4 and 14-5. Comment on the results.

3. What options should Speedy consider, with regard to individual customers, in light of the new data and analysis of office overhead?

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Home Insert A Page Layout Formulas Data Review View B C E F Art Boris Chetan Darby Esther Total 1 2 Revenues 3 Technician and equipment cost 4 Office overhead allocated 5 Operating income $260,000 $200,000 $322,000 $122,000 $212,000 $1,116,000 182,000 175,000 225,000 107,000 178,000 31,859 24,507 39,457 14,949 25,978 867,000 136,750 $ 46,141 $ 493 $ 57,543 $ 51 $8,022 $ 112,250