Customer Profitability Analysis

Elite Services, Inc. provides residential painting services for three home building companies, Brookside, Edgewater, and Hillrose, and it uses a job costing system for determining the costs for completing each job. The job cost system does not capture any cost incurred byElitefor return touchups and refinishes after the homeowner occupies the home.Elitepaints each house on a square footage contract price, which includes painting as well as all refinishes and touchups required after the homes are occupied. Each year,the companygenerates about one-third of its total revenues and gross profits from each of the three builders. TheElite ownerhas observed that the builders, however, require substantially different levels of support following the completion of jobs. The following data have been gathered:

Support ActivityDriverCosts per Driver UnitMajor refinishesHours on jobs$ 80TouchupsNumber of visits$ 130CommunicationNumber of calls$ 25

BuilderMajor

RefinishesTouchupsCommunicationBrookside130250610Edgewater70210365Hillrose79215350

Assuming that each of the three customers produces gross profits of $125,000, calculate the profitability from each builder after taking into account the support activity required for each builder.

Brookside $Answer

Edgewater $Answer

Hillrose$Answer

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