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
|
$5,000
|
$4,500
|
|
J Jackson
|
3,500
|
3,650
|
|
Roger Jones
|
2,000
|
2,500
|
|
Paul Saas
|
1,500
|
1,000
|
|
Becky Stephan
|
6,000
|
5,000
|
Question 1: Compute the operating income for each of the five customers. Subtract customer costs from customer revenues to determine customer operating income.
Question 2: What options should Handy-Man Services consider in light of the customer-profitability results? Think about what Handy-Man Services should do with their most profitable and least profitable customers.
Question 3: What problems might Handy-Man Services encounter in accurately estimating the operating costs of each customer? Think about the potential errors that can happen in estimating costs.