customer profitability service company instant service is 267598

Customer profitability, Service Company. Instant Service (IS) repairs printers and photocopiers for five multisite companies in a tristate 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 following information:





1. Compute customer level operating income using the new information that Sherman has gathered.

2. Prepare exhibits for IS similar to Exhibits 14 7 and 14 8. Comment on the results.

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