Strategic Cost Management Group Assignment Sheet Exhibit 1 Data Intelligence Pro Forma Income Statement for the Year 2018 (Rounded) Projects completed Project revenue Salaries Overhead expenses Total expenses Net income 120 $2,800,000 $ 800,000 1,400,000 2,200,000 $ 600,000 Exhibit 2 Data Intelligence Pro Forma Income by Project Size for the Year 2018 (Rounded) Panel 2A Prepared by Erica Evans Projects completed Project revenue Project salaries Overhead allocated (based on project salaries Net income Panel 2B Prepared by Erica Evans Largest 20 Projects Smallest 100 Projects $1,300,000 $1,500,000 (400,000) (400,000) (700,000) (700,000) $200,000 $400,000 Projects completed Project revenue Project salaries Overhead allocated (based on project salaries Net income Largest 60 Projects Smallest 60 Projects $1,950,000 $850,000 (600,000) (200,000) (1,050,000) $300,000 ($350,000) $300,000 Bu ategic Cost Management Group Assignment Bucet Exhibit 3 Data Intelligence Analysis of Overhead Expenses for 2018 Panel A Overhead by Survey Phase Survey proposed and design (160 trips) Data collection and tabulation (4,200 days) Analysis and report preparation (1,300 pages) Total overhead Panel B Overhead by Project Size (20/100 split) Survey proposed and design Data collection and tabulation $640,000 370,000 390,000 $1,400,000 Largest 20 Projects Smallest 100 Projects 60 trips 100 trips 1400 days 2,800 days Analysis and report preparation Panel C Overhead by Project Size (60/60 split) Survey proposed and design Data collection and tabulation Analysis and report preparation 450 pages Largest 60 Projects 850 pages Smallest 60 Projects 100 trips 60 trips 3,000 days 1,200 days 940 pages 360 pages 5. The assumption underlying the above analyses is a linear relationship between project size and profitability. However, the assumption is questionable and deserves further investigation. Utilize the existing data, classify projects by size into three groups (small, medium, and large), and calculate their profitability. Comment on the linearity assumption and discuss how you would revise your response to requirement 3. (25 marks)