Comet Texas is in the software implementation business.The company employees approximately 800 employees in 10 countries.The employees are primarily consultants that range from new college graduates to seasoned 20-year veterans of the industry.Comet Texas performs projects that range from the initial implementation of software, development of customized modules for customers, upgrade and maintenance support and conversions to other systems.Projects can range from 1 week to up to 2 years.The minimum bid on a project is $5,000 and the company's largest 2 year project was billed at $1.8m.

Employees are allocated to projects based on project manager preference.Some employees have a billable utilization rate at over 100% per year, while other employees have a billable utilization rate of 70%.The company has had to defer or turn down work due to a lack of the correct resources being available.Hiring is done sporadically and there is always a concern about the need to cut back on employees. Salary and salary related costs represents Comet's primary costs and revenue driver.All other costs (including rent, insurance and all other non-salary related make up 20% of total expenditures of the company).

The Vice President of Operations is positioned in the Finance chain of command and reporting to the CFO. Since the company's inception, financial breakdowns and isolated perspectives have prevented it from growing. The Vice President of Operation reports up to the then CFO.Financial results are not widely disseminated and key employees can get a sense of numbers in the quarterly or bi-annual town hall meetings where the roll-up picture of the past performance is presented in numbers that do not relate to future plans. Very lose budgets are prepared in the first quarter of the year and are not utilized after the budgeting beatings are completed.

The project managers and executives in Comet currently have no visibility of two important things:

1.Variable selling expenses (primarily travel and entertainment) that have to be accounted and budgeted for which are eating margin out of deals.

2.Every person in sales and professional services only have some vague calculations on how they are profitable.Every person in sales and professional services had some anecdotal calculation on how they were profitable.They each did blind financial gymnastics to explain how any cost overruns were attributable to another department, and,were not accurately applied to their job, but were some other process cost that were in some other financial accounting number

There is a high level of friction in the company as to how costs are allocated and internal arguments over the actual cost basis for deals.

The budget rate agreed across the board in the calculation of project costs is $1,000 per day per employee allocated to a job, regardless of type of project, required employee expertise or actual hours worked.This number is arrived at by using the financial accounting rolled up costs which included the sum of the direct labor costs, all fixed and variable overhead, travel and entertainment and all SG&A and dividing by the total number man-hours in the company. This "consolidated" rate has been the same for the past 3 years.There are additional technical related costs which were not assigned to the implementation of certain products in the company where they were much more expensive to implement.The equation got sloppy with the math and assumed that any variances all averaged out, a belief that has not been validated.

These problems are further compounded by yet another challenge. The company has a large amount of loans from the consortium owners which are bleeding the company with the increased borrowing costs and are not considered in any of the project calculations.The company had never been profitable in the twelve years it has been in existence.Losses have been explained by management as resulting from project overruns, underbidding of projects, rising employee salaries and health care costs and the increased interest costs.

Then everything changes in Q3 2020 (and it's NOT COVID related!).The board dismisses the CEO and brings in a new one, YOU, who actually have a software company background and a MBA Degree from UT Dallas. All previous CEOs are IT directors from the chemical industry. Things begin to change rapidly.

With years of experience, you have realized that while driving the business vehicle, seeing the rear-view mirror of the Financial Accounting numbers only fuels management's sense of right and wrong, but does not provide useful information for the rest of the company to manage the business. By using the forward looking tools derived from managerial accounting, we are able to have meaningful business inputs to know how our decisions will impact the performance of the company. You are trying to pinpoint the problems and come up with a better analysis system to make decisions. Not only does your future bonus depend on improvement in the company's performance, but so does your future employment.

Answer the questions below, utilizing concepts and terms from the entirety of the ACCT6202 - Managerial Accounting course.

Assumptions:In this case study you will make assumptions about the scenario, be sure to document those here.

1.What do you see are the top 3 issues with the finance function in Comet Texas? (8pt)

2. Now that you are the new CEO, list a solution for each of the issues you identified above or strategies you are planning to steer the company towards to increase the profitability of projects and provide more useful information for pricing and managing projects. (8pts)

3.Determine a different and more effective way to come up with job costs during the bid process, while the project is being performed and after the project is concluded.How can this benefit project management? (8pts)

4. Since Comet is in a time of great change, being able to break even is crucial. Explain the importance of doing break even analysis. How would you incorporate the concepts of break-even in the project bid, management and billing process? (8pts)

5.In order to tell if change and suggestions are working, there needs to be a benchmark to compare results of operations to.Identify three benchmarks that you would recommend that they utilize.(8pts)

6.The Balanced Scorecard process attempts to identify important links between financial performance and the underlying customer, internal processes and organizational metrics. This creates a mechanism for translating the strategic vision into concrete actions necessary to achieve success.Create a balanced scorecard for the organization to track the recommendations that you identified in Step 3, 4 and 5 above. (10pts)