Customer Profitability AnalysisElite Services, Inc. provides residential painting services for three home building companies, Brookside, Edgewater, and Hillrose, and it uses a job costing system for determining the costs for completing eachjob. The job cost system does not capture any cost incurred by Elite for return touchups and refinishes after the homeowner occupies the home. Elite 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-third of its total revenues and gross profits from each of thethree builders. The Elite 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 ActivityDriverMajor refinishesHours on jobsNumber of visitsTouchupsCommunication Number of callsMajorBuilder Refinishes TouchupsBrooksideEdgewaterHillroseCosts per Driver Unit$ 150$ 100$301207080Edgewater $Hillrose $260205220Communication900530590Assuming that each of the three customers produces gross profits of $150,000, calculate the profitability from each builder after taking into account the support activity required for each builder.Brookside $

Customer profitability analysis is a type of analysis that helps to determine how profitable a…

Assuming that each of the three customers produces gross profits of $150,000, calculate the profitability from each builder after taking into account the support activity required for each builder. Brookside $ Edgewater $ Hillrose $

Assuming that each of the three customers produces gross profits of $150,000, calculate the profitability from each builder after taking into account the support activity required for each builder. Brookside $ Edgewater $ Hillrose $

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Customer Profitability Analysis
Elite Services, Inc. provides residential painting services for three home building companies, Brookside, Edgewater, and Hillrose, 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 Elite for return touchups and refinishes after the homeowner occupies the home. Elite 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-third of its total revenues and gross profits from each of the
three builders. The Elite 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
Number of visits
Touchups
Communication Number of calls
Major
Builder Refinishes Touchups
Brookside
Edgewater
Hillrose
Costs per Driver Unit
$ 150
$ 100
$30
120
70
80
Edgewater $
Hillrose $
260
205
220
Communication
900
530
590
Assuming that each of the three customers produces gross profits of $150,000, calculate the profitability from each builder after taking into account the support activity required for each builder.
Brookside $

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