Hallstead Jewelers Essay

460 Words2 Pages
Survey Masters LLC Case-Study Question 1: Exhibit 2A, shows the projects categorized on their size. The first category is the largest 20 projects and second category is the smallest 100 projects. While the total revenue collected by the smallest 100 projects is greater than that of the largest 20 projects, and the salaries and overhead allocated are the same, resulting in the 100 smallest projects ends up being more profitable. Exhibit 2B the projects are instead divided in half. The largest 60 projects earn higher revenue, however, they produce more salaries expenses and overhead allocated. The smallest 60 projects, on the other hand, have less revenue with less salaries expenses and overhead allocated. Therefore these projects finally end up with same net income. They are equally profitable. Question 2: There is a direct relationship between project Size and project profitability. While larger projects have a larger overhead cost they are more profitable long term. The largest 20 projects earned an average cost per project of $16,392.86 compared to the smallest 100 projects average cost per project of $10,721.43. We calculated these numbers by dividing total overhead cost allocated using the ABC method by the total number of projects. Question 3: According to the calculation and data analyzed in Question 2, the profit margin of largest 20 projects and smallest 100 projects are 44.01% and 1.86% respectively. In other words, the largest 20 projects are more profitable. Also, although the total revenue of smallest 20 projects is greater than largest 100 projects and they have same salary expense, the overhead costs of smallest 100 projects are much more than largest 20 projects. As a result, Survey Master should not continue to take all projects offered to the company. And focus on the largest
Open Document