Reference no: EM132526396

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 ActivityDriverCosts per Driver UnitMajor refinishes

Hours on jobs$ 80Touchups

Number of visits$ 130

CommunicationNumber of calls$ 25

BuilderMajor

                      Refinishes         Touchups

Communication

Brookside       1302           50610

Edgewater      702     10365

Hillrose79215350

Question 1: Assuming that each of the three customers produces gross profits of $125,000, calculate the profitability from each builder after taking into account the support activity required for each builder.