Question

Customer Profitability Analysis HyStandard Services, Inc. provides residential painting services for three home building companies, Alpine, Blue Ridge, and Pineola, and it uses a job costing system for determining the costs for completing each job. The job cost system does not capture any cost incurred by HyStandard for return touchups and refinishes after the homeowner occupies the home. HyStandard paints each house on a square footage contract price, which includes painting as well as all refinishes and touchups required after the homes are occupied. Each year, the company generates about one chird of its total revenues and gross profits from each of the three bulders. The HyStandard owner has observed that the builders, however, require substantially different levels of support following the completion of jobs. The following data have been gathered: Support activity Driver Major refinishes Hours on jobs Touchups Communication Number of calls Cost per Driver Unit $140 Number of visits 100 40 Major Refinishes Touchups Communication Builder Alpine Blue Ridge 150 360 110 205 Pneola 42 115 190 Assuming that each of the three customers produces gross profits of s60,000, calculate the profitability from each builder after taking into account the support activity required for each builder Activity Refinishes Touchups Communication Alpine ue Ridge Pineola Total support costs s Gross profit Customer profits

Answer 1

Activity	Alpine	Blue ridge	Pineola
Refinishes	$11,200 (80*$140)	$4,900 (35*$140)	$5,880 (42*$140)
Touchups	15,000 (150*$100)	11,000 (110*$100)	11,500 (115*$100)
Communication	14,400 (360*$40)	8,200 (205*$40)	7,600 (190*$40)
Total support cost	40,600	24,100	24,980
Gross profit	60,000	60,000	60,000
Customer profit	$19,400	$35,900	$35,020