The Comcast Construction Company Civil Engineers consists of two divisions. The divisions are Water and Infrastructure. The company sells engineering services to various customers. The following are the bill rates for the various staff classifications:

Vice President $250/hour, Senior Engineer $200/hour, Associate Engineer $190/hour, Staff Engineer $160/hour

The two divisions expect to bill the following hours:

Water - 10,000 hours, vice president at 10% of the time, 20% of Senior Engineer time 10% to Associate engineers and remaining to Staff Engineers.

Waste Water - 6,000 hours, vice president at 12% of the time, 20% of Senior Engineer time, 5% to Associate engineers and remaining to Staff Engineers.

The Direct Labor costs per hours are as follows:

Vice President $90/hour, Senior Engineer $70/hour, Associate Engineer $60/hour, Staff Engineer $50/hour.

The utilization (billable ratio to total hours) for each staff members are as follows:

Vice President 60%, Senior Engineer 80%, Associate Engineer 85%, Staff Engineer 90%.

The company has the following other costs:

Admin Salaries $81,000, Rent $120,000, Utilities $16,000, Benefits $75,000

Assume that there are 2080 hours per year that each engineer can work including vacation and other benefit hours.

You are an outside consulting firm and the company Board and the CFO have engaged you. The goal of the Board and the CFO is to improve profitability of the divisions and company.

Q#1) Develop a static budget for this company.

Q#2) Assume that the actual utilization came in at the following rates:

Vice President 50%, Senior Engineer 82%, Associate Engineer 88%, Staff Engineer 93%.

Based on the above utilization, develop a flexible budget and calculate the Level 2/3 variances.

Q#3) What recommendations can be made for the upcoming year in budgeting to the CFO for additional profitability and increasing revenue?

Q#4) What approaches would your recommendations to increase the company overall utilization of staff and billable hours?

Q#5) How will your recommendations impact customer profitability or divisional profitability?

Q#6) The company wants to add a new division. It will be the Construction Division with 3 people. Please discuss pros and cons of adding a division and when you might consider not to add the division.