Question
Fumby and Kellie Associates (FK&A) is an engineering firm that has been in practice for only a few years. The market for FK&As services is
Fumby and Kellie Associates (FK&A) is an engineering firm that has been in practice for only a few years. The market for FK&As services is very competitive. To compete, FK&A must deliver high-quality service at a low cost. The data below relate to 2018 and 2019:
| 2018 | 2019 |
1. Number of jobs billed | 40 | 50 |
2. Selling price per job | $32 000 | $30 000 |
3. Engineering labour-hours | 24 000 | 27 000 |
4. Cost per Engineer labour-hour | $35 | $36 |
5. Engineer-support capacity (in number of jobs the firm can do) | 60 | 60 |
6. Total cost of engineer-support capacity | $168000 | $180 000 |
7. Engineer-support-capacity cost per job (row 6 row 5) | $2 800 | $3 000 |
Engineer labour-hour costs are variable costs. Engineer support costs for each year depend on the Engineer support capacity that FK&A chooses to maintain each year (i.e. the number of jobs it can do each year). Engineer support costs do not vary with the actual number of jobs done that year.
Required:
- Identify FK&As strategy, supported by reasons. (2 Marks)
- Describe two key measures you would include in FK&As balanced scorecard, under each of the four perspectives, and your reasons for doing so. (12 Marks
- Calculate the operating profit in 2018 and 2019. (4 Marks)
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