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	Costs per Driver Unit
Major refinishes	Hours on jobs	$ 150
Touchups	Number of visits	$ 100
Communication	Number of calls	$ 30

Builder	Major Refinishes	Touchups	Communication
Brookside	120	260	900
Edgewater	70	205	530
Hillrose	80	220	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 $Answer
Edgewater $Answer
Hillrose     $Answer

Answer 1