The Survey Masters LLC copy Essay example

788 Words Jul 26th, 2015 4 Pages
1. The reason that smaller projects appear to be more profitable is because of the cost drivers that Linda Evans chose to use to allocate the overhead costs. It is unfair to allocate an equal amount of overhead cost to the different kinds of projects, when the smaller projects cost more in days of data collection than the larger reports do. This is especially important to consider because the days of data collection is directly related to the project salaries, which is the cost driver for the allocation of overhead.
Large Projects
600 days/20 projects = 30 days per project
Small Projects
3600 days/100 projects = 36 days per project

2. $640,000/160 trips = $4000 per trip $370,000/4200 days = $88.095 per day $390,000/1300 pages = $300
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So, by focusing on larger projects, the company’s revenue will be $1,300,000, which leads to $65,000 of revenue per project ($1,300,000/20 large projects). Thus, Survey Master should focus their sales efforts mainly on large projects. Even though the trips required for a small project is 1.1 trips and for a large project is 2.5 trips and even though large projects require 12.5 pages and small project require 10.5 pages, it is still more profitable to conduct large projects; this is because the collection of data is cheaper in large projects and revenue generation is larger in large projects. However, it is definitely recommended that Survey Master not solely focus on large projects because small projects are also required. For instance, if Survey Master wants to target a new client base, conducting small projects will be more feasible to test the results before investing in the large project. In the future, Survey Master LLC’s strategy should be to select projects that are equal to or greater than $65,000.
4. We previously decided that Survey Master LLC’s future strategy is to select projects that are equivalent to or greater than $65,000. The ratio of small projects to larger is 20:100, reduced to 1:5 (every five projects completed, one large project is completed). If the salaries remain constant, the calculated number of large projects completed within a year is 40. With that, the revenue would yield $2,600,000.

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