Handy-Man Services is a repair-service company specializing in small household j

Question

Handy-Man Services is a repair-service company specializing in small household jobs.  Each client pays a fixed monthly service fee based on the number of rooms in the house.  Records are kept on the time and material costs used for each repair.  The following profitability data apply to five customers.     

                                                Customer Revenues    Customer Costs

Marveline Burnett                                 $300                       $225

J Jackson                                             200                         305

Roger Jones                                           80                          75

Paul Saas                                              75                         110

Becky Stephan                                     350                         220

Question 1: Compute the operating income for each of the five customers.  

Question 2: What options should Handy-Man Services consider in light of the customer-profitability results?  

Question 3:  What problems might Handy-Man Services encounter in accurately estimating the operating costs of each customer?  

Explanation / Answer

Hi,

Please find the answer as follows:

Part 1:

Part 2:

Handy-Man should consider Becky Stephan as it offers the highest operating income.

Part 3:

Problems may arise on account of estimation of fixed costs which in turn may affect the overall profitability of the company.

Thanks.

Customer Revenues Customer Costs Operating Income Marveline Burnett 300 225 75 J Jackson 200 305 -105 Roger Jones 80 75 5 Paul Saas 75 110 -35 Becky Stephan 350 220 130

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