Problem:
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:
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?
Note: Please show how to work it out.