The Seneca Company (Civil Engineers) consists of two divisions. The divisions are

Transportation 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:

Transportation - 10,000 hours, vice president at 10% of the time, 20% of Senior Engineer

time 10% to Associate engineers and remaining to Staff Engineers

.

Infrastructure - 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 member is 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

3

Benefits $75,000

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

other benefit hours.

Group Assignment:

You are an outside third party Human Resources consulting firm and the Seneca Company Board

of Directors, CFO and the CPO have engaged your company. The goal of the Board, CFO and

the CPO is to improve profitability of the divisions and company. Therefore, to accomplish

providing engagement advice to the Board, CFO and CPO the consulting team should answer the

following questions during the presentation and in the final report.

1. Create a static budget for the company.

2. Assume that the actual utilization came in at the following rates:

Vice President 50%

Senior Engineer 82%

Associate Engineer 88%

Staff Engineer 93%

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

variances.

4. What recommendations can be made for the upcoming year in budgeting to the CFO for

additional profitability and increasing revenue?

5. What approaches would your recommendations to increase the company overall

utilization of staff and billable hours?

6. How will your recommendations impact customer profitability or divisional profitability?

7. 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 adding the division.