TMP Human Resource Consulting had the following contribution margin income statement for the year ended 2019.

Required Answer each of the following independent situations.

(a) Explain how an understanding of CVP analysis would improve the performance of the manager of a human resource consulting firm like TMP Human Resource Consulting.

(b) As a graduate of a human resource management course you have finally become the manager of TMP Human Resource Consulting. In setting your salary at $500 000, you need to calculate what the service fees need to increase by to maintain the company’s profit equal to at least 25% of total service fees.

(c) You employ a friend who graduated with a degree in marketing and she believes that by increasing variable expenses by $1200 per client and fixed advertising expenses by $300 000 the firm will increase the number of clients by 100 per year. Would your marketing friend’s suggestions improve profitability? Explain why or why not.

Transcribed Image Text:

Employment services fees (1500 employed) Variable expenses Contribution margin Fixed expenses Profit $ 36 000 000 14 400 000 21 600 000 12240 000 $ 9360 000