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Handley Conference Solutions specializes in the design and installation of meeting and conference centers for large corporations. When bidding on jobs, the company estimates
Handley Conference Solutions specializes in the design and installation of meeting and conference centers for large corporations. When bidding on jobs, the company estimates product cost and direct labor for installers and marks up the total cost by 30 percent. On a recent job for Wildhorse Industries, the company set its price as follows: Product costs including podiums, seating, lighting, etc. $179.200 Installer salaries Total Markup at 30 percent Bid price 27,100 206,300 61,890 $268.190 The job turned out to be a big hassle. Wildhorse requested 24 change orders, although the dollar value of the products it requested changed very little. The company also returned 33 items that had extremely minor flaws (scratches that were barely visible and would be expected in normal shipping). Wildhorse also requested seven meetings with designers taking 40 hours before its plan was finalized. Normally, only two or three meetings are necessary. Laura Hall, controller for Handley, decided to conduct a customer profitability analysis to determine the profitability of Wildhorse. She grouped support costs into three categories with the following drivers: be expected in normal shipping). Wildhorse also requested seven meetings with designers taking 40 hours before its plan was finalized. Normally, only two or three meetings are necessary. Laura Hall, controller for Handley, decided to conduct a customer profitability analysis todetermine the profitability of Wildhorse. She grouped support costs into three categories with the following drivers: Driver Annual Value of Driver Annual Cost Change orders 830 change orders $220,780 Number of returns 1,000 product returns 76,000 Design meeting hours 1,420 meeting hours 85,200 Calculate the indirect service costs related to the job performed for Wildhorse Industries. Change orders Returns Design hours Total $
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