HomeInsertPage LayoutFormulasDataReviewViewDOkieWizardDuranTotalGrainger$390,000 $300,000 $483,000| $183,000337,500 160,50022,423740 $ 86,314| $Avery2 Revenues3 Technician and equipment cost4 Office overhead allocated5 Operating income$318,000 $1,674,000267,0001,300,500205,12538,96777 $ 12,033 $ 168,375273,000262,50047,78959,18636,760$ 69,211| $Abby Costa, IS's new controller, notes that office overhead is more than 10% of total costs, so she spendsa couple of weeks analyzing the consumption of office overhead resources by customers. She collects thefollowing information:HomeInsertPage LayoutFormulasDataReviewCost Driver Rate$85 per service call$80 per Web-based parts order$50 per bill (or reminder)Activity Area2 Service call handling3 Parts ordering4 Billing and collection HomeInsertPage LayoutFormulasDataReviewViewABAvery Okie Wizard Grainger Duran9 Number of service calls10 Number of Web-based parts orders11 Number of bills (or reminders)225360601802701803159022522545135135901801. 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.3. What options should IS consider, with regard to individual customers, in light of the new data andanalysis of office overhead?Required

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Asked Jan 20, 2020
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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 2017, IS reported the following results:

Home
Insert
Page Layout
Formulas
Data
Review
View
D
Okie
Wizard
Duran
Total
Grainger
$390,000 $300,000 $483,000| $183,000
337,500 160,500
22,423
740 $ 86,314| $
Avery
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
47,789
59,186
36,760
$ 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
Cost Driver Rate
$85 per service call
$80 per Web-based parts order
$50 per bill (or reminder)
Activity Area
2 Service call handling
3 Parts ordering
4 Billing and collection
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Home Insert Page Layout Formulas Data Review View D Okie Wizard Duran Total Grainger $390,000 $300,000 $483,000| $183,000 337,500 160,500 22,423 740 $ 86,314| $ Avery 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 47,789 59,186 36,760 $ 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 Cost Driver Rate $85 per service call $80 per Web-based parts order $50 per bill (or reminder) Activity Area 2 Service call handling 3 Parts ordering 4 Billing and collection

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Home
Insert
Page Layout
Formulas
Data
Review
View
A
B
Avery Okie Wizard Grainger Duran
9 Number of service calls
10 Number of Web-based parts orders
11 Number of bills (or reminders)
225
360
60
180
270
180
315
90
225
225
45
135
135
90
180
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.
3. What options should IS consider, with regard to individual customers, in light of the new data and
analysis of office overhead?
Required
help_outline

Image Transcriptionclose

Home Insert Page Layout Formulas Data Review View A B Avery Okie Wizard Grainger Duran 9 Number of service calls 10 Number of Web-based parts orders 11 Number of bills (or reminders) 225 360 60 180 270 180 315 90 225 225 45 135 135 90 180 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. 3. What options should IS consider, with regard to individual customers, in light of the new data and analysis of office overhead? Required

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Expert Answer

Step 1

1.

Compute the customer level operating income.

Accounting homework question answer, step 1, image 1
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Step 2

2.

 Prepare the exhibit for I and comment on the result.

Accounting homework question answer, step 2, image 1
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Step 3
Accounting homework question answer, step 3, image 1
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