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SlowMot Service repairs photocopiers for five multisite companies. SlowMot's costs consist of staff and material costs are directly traceable to the customer and a pool

SlowMot Service repairs photocopiers for five multisite companies. SlowMot's costs consist of staff and material costs are directly traceable to the customer and a pool of office overhead. Until recently, SlowMot estimated customer profitability by allocating the office overhead to each customer based on share of revenues.

For 2023, SlowMot reported the following results:

A B C D E Total
Revenue 312,000 240,000 386,000 146,000 254,000 1,338,000

Staff

and

material costs

218,400 210,000 270,000 128,400 213,600 1,040,400
Office overhead allocated 12,102 9,309 14,973 5,663 9,852 51,900

Hillary, SlowMot's new controller found the following information regarding the consumption of office overhead resources by customers.

Activity Area Rate Cost Driver Rates
Parts ordering $80 Per part order
Billing and collection $150 Per bill (or reminder)

A B C D E
Parts ordering 30 40 50 30 30
Billing and collection 40 50 70 40 50

Required:

  1. Compute customer-level operating income using the existing information
  2. Compute customer-level operating income using the new information that was gathered.
  3. Why customer profitability analysis is important?

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