Customer ProTitablity Analysis tyStandard Services, Inc. provdes residential pai

ID: 2341208 • Letter: C

Question

Customer ProTitablity Analysis tyStandard Services, Inc. provdes residential painting services for three home building companies, Alpine, Blue Ridge. and Pineola, and it em for determining the costs for completing each job. The job cost systerm does not capture any cost incurred by HyStandard fses a Jo touchups and refinishes after the homeowner occupies the home. HyStandard paints each house on a square footage contract price, whi painting as well as all refinishes and touchups required after the homes are occupied. Each year, the company generates about one third of is ud revenues and gross profits from each of the three builders. The HyStandard owner has observed that the builders, however, require subglt different levels of support following the completion of jobs. The following data have been gathered Support activity Driver Major refinishes Hours on jobs substantially Cost per Driver Unit $120 Nmber efudsits Communication Number of calls 40 TouchupsCommunication BuilderMajor Refinishes Alpine Blue Ridge Pineola 360 205 190 80 150 35 110 Assuming that each of the three customers produces gross profits of $150,000, calculate the profitability from each builder after taking into accou the support activity required for each builder. Activity Alpine Blue Ridge Pineola Refinishes Touchups Communication Totar support costs Gross proft Customer profits

Explanation / Answer

Solution:

Activity

Alpine

Blue Ridge

Pineola

Refinishes

$9,600

($120*80)

$4,200

($120*35)

$5,040

($120*42)

Touchups

$15,000

($100*150)

$11,000

($100*110)

$11,500

($100*115)

Communication

$14,400

($40*360)

$8,200

($40*205)

$7,600

($40*190)

Total Support Costs (B)

$39,000

$23,400

$24,140

Gross Profit (A)

$150,000

Customer Profits (A - B)

$111,000

$126,600

$125,860

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you