can i get breif explanation for this problem ..............thank you
P 145: Email from Smash Batik received tlte t'ollowlng email lion] a former student. I hope you are dolng well. I tools your Managerial Accounting class ten years ago and have aquestion on hot-I.I to do costing in a servioewbased business. Cunentiy. I ant working for a limi that manufactures various prod- ucts used in pipelines ttcrtlue Is'rencl'ies. liange pullers. bolts and anges. grinding machines. etc.fI. Five years ago we began servicing pipelines in refineries. ot'I'shorefonshore platforms. nuclear plants. etc Uur services include joint integrity. leak sealing. and lettlt-I'Iee bolted con- nections Our service technicians go to customers to service their pipelines tutd charge the cus terriers alt hourly fee. In servicing these customers. our technicians cl'ten sell these customers our 1."arioos manufactured products. The company is organized around l'unctions and not as separate prot centers. Currently. irur cost accounting syslern only calculates the cthis till- physicul pro-ducts We mana- luciut'e. not the test Itl' tllli' senicing sitle uni" the business. While We charge trur customers a. lee her on: yininns senrlces. nur accn'unling system tie-es nut truck the actual ctrsts ui' presiding. these services. I'Ittr does it ll'uclt the products that\" castmnen purchase heeudse nt.tr technicians require lhese products it: Complete lheil' sen-icing I'uncthtns. Rather. the cost tJl' eld technicians is "tr't'et'heutl." atttl hence our pritfiiuhilily is all trt'er the place. In .sluclt periods. the ulilimiitni iii n'ut' eld lechnlciuns is low and our prul'lluhliily is Itr'n'. while In peak periuds [he utilli'uiiun of our technicians is high and nut overall pmi'itahiliiy rises. We should [hut we don't: account [UT time and uliliaaiitrh rate of technicians. cost and ulili'dinn ttl' Itillillli Ltsed, training cusls. Mrtungemt'ar Accounting in u Changing Earl'r'rnnmcnr E41 and the reyenues ol' the poodurcts sold during the servicing These latter revenues are treated as Ieyenues to the entire corporation. not net-'enues to the servicing encI oi the business. We don't know the protability ol'our servicing business. although we ate condent it is I-'ery prolitahle. Before jumping to any conclusions. I would like to ltnow hot-I-I to proceed about possible changes in our accounting systems and any advice you might olI'er regarding how to better evaluate the prnlitability nl'our new {and growing: service husniess. Thank you for your tinte. Best Regards 5UJ'ESII Batik Required: 1'i'il'hat :IdVice-'guidanee would you olI'et' Sureslt'.' P144": The Pottery Store
