ACCT434 Advanced Cost Management: Week 6 Problem 1 - Handy-Man Services

Note: Please make sure you review your questions with the questions in this tutorial. There will be times that the numbers are changed but you will be able to follow the solution by checking the worksheet cells for links and formulas.

ACCT434 Advanced Cost Management
Week 6 Homework (Customer Profitability Capital Budgeting)

Problem 1:
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

Required:
a. Compute the operating income for each of the five customers.
b. What options should Handy-Man Services consider in light of the customer profitability results?
c. What problems might Handy-Man Services encounter in accurately estimating the operating costs of each customer?
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