Home Insert Page Layout Formulas Data Review View A B D Okie Wizard Total Grainger $390,000 $300,000 $483,000 || $183,000 160,500 22,423 740 $ 86,314| $ Avery Duran 2 Revenues 3 Technician and equipment cost 4 Office overhead allocated 5 Operating income $318,000 $1,674,000 267,000 1,300,500 205,125 38,967 77 $ 12,033 $ 168,375 273,000 262,500 36,760 337,500 59,186 47,789 $ 69,211| $ Abby Costa, 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 the following information: Home Insert Page Layout Formulas Data Review Activity Area 2 Service call handling 3 Parts ordering 4 Billing and collection Cost Driver Rate $85 per service call $80 per Web-based parts order $50 per bill (or reminder) Home Page Layout Formulas Data Insert Review View A B Avery Okie Wizard Grainger Duran 270 225 180 225 9 Number of service calls 10 Number of Web-based parts orders 11 Number of bills (or reminders) 360 315 135 60 90 180 225 90 180 45 135 1. Compute customer-level operating income using the new information that Costa has gathered. 2. Prepare exhibits for IS similar to Exhibits 14-4 and 14-5. Comment on the results. Required 3. What options should IS consider, with regard to individual customers, in light of the new data and analysis of office overhead?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Customer protability, service company. Instant Service (IS) repairs printers and photocopiers for ve 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 protability by allocating the office overhead to each customer based on share of revenues. For 2017, IS reported the following results:

Home
Insert
Page Layout
Formulas
Data
Review
View
A
B
D
Okie
Wizard
Total
Grainger
$390,000 $300,000 $483,000 || $183,000
160,500
22,423
740 $ 86,314| $
Avery
Duran
2 Revenues
3 Technician and equipment cost
4 Office overhead allocated
5 Operating income
$318,000 $1,674,000
267,000
1,300,500
205,125
38,967
77 $ 12,033 $ 168,375
273,000
262,500
36,760
337,500
59,186
47,789
$ 69,211| $
Abby Costa, 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 the
following information:
Home
Insert
Page Layout
Formulas
Data
Review
Activity Area
2 Service call handling
3 Parts ordering
4 Billing and collection
Cost Driver Rate
$85 per service call
$80 per Web-based parts order
$50 per bill (or reminder)

Home
Page Layout
Formulas
Data
Insert
Review
View
A
B
Avery Okie Wizard Grainger Duran
270
225
180
225
9 Number of service calls
10 Number of Web-based parts orders
11 Number of bills (or reminders)
360
315
135
60
90
180
225
90
180
45
135
1. Compute customer-level operating income using the new information that Costa has gathered.
2. Prepare exhibits for IS similar to Exhibits 14-4 and 14-5. Comment on the results.
Required
3. What options should IS consider, with regard to individual customers, in light of the new data and
analysis of office overhead?

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