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Southland Corporation is a small information-systems consulting firm that specializes in helping companies implement standard sales-management software. The market for Southland's services is very competitive.
Southland Corporation is a small information-systems consulting firm that specializes in helping companies implement standard sales-management software. The market for Southland's services is very competitive. To compete successfully, Southland must deliver quality service at a low cost. Southland presents the following data for 2011 and 2012. EEB (Click the icon to view the data.) Software-implementation labor-hour costs are variable costs. Software-implementation support costs for each year depend on the software-implementation support capacity Southland chooses to maintain each year (that is, the number of jobs it can do each year) Software-implementation support costs do not vary with the actual number of jobs done that year. Read the requirements. Requirement 1. Calculate Southland's operating income in both 2011 and 2012. 2011 Revenues Costs Software implementation labor costs Software implementation support costs Total costs Operating income Data Table 2011 2012 80 50,000 36,000 65 95 389,500 4,100 1. 2. 3. 4. 5. 6. 7. Number of jobs billed Selling price per job Software-implementation labor-hours Cost per software-implementation labor-hour Software-implementation support capacity (number of jobs it can do) Total cost of software-implementation support Software-implementation support-capacity cost per job (row 6/ row 5) 70 52,000 $ 35,000 62 $ 95 $361,000 $ 3,800 $ i Requirements 1. Calculate the operating income of Southland Corporation in 2011 and 2012 2. Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2011 to 2012. 3. Comment on your answers in requirement 2. What does each of these components indicate
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