ACCMOD4

Case Assignment

Revise the table above assuming that non-traceable costs are not allocated

If we assume that non-traceable costs are not allocated , the table will contain the following figures

br Billings (Revenue ) 50000 22000 10000 16000 2000

Traceable Consulting Costs 33500 14000 6000 12500 1000

Gross Profit on Sales 16500 8000 4000 3500 1000

Traceable Other Costs 1000 300 200 500 0 .00

Net Income 15500 7700 3800 3000 1000 If we compare to the primary estimations (table given - with non-traceable costs , the difference will be substantial

Net

Income 3000 2200 1300 -1000 500

NI2 /NI1 5 .2 3 .5 3 -3 2 NI1 - net income considering non-traceable costs NI2 - net income without non-traceable costs

The main implication of the absence of the non-traceable cost is that it shows the effectiveness of the operations of each individual office (since non-traceable costs are divided equally among offices . If we make simple estimations (non-traceable costs /revenue , we 'll notice that the percentage of non-traceable costs attributed to each office 's individual revenue is 25 . Having analyzed the modified table , we can say that the best performance was shown by New York office , then Chicago , Paris and Little Rock

Compare the evaluation of the office managers that would be made under the original table and the table you have just created

Under the original table the best performance would be shown by the manager in New York , then the one in Chicago , Little Rock and he last place would be taken by the manager running the office in Paris

Yet , if we ignore non-traceable costs , the manager in Little Rock would be the last in the rank . Thus , from the first sight it is reasonable to say that the least efficient manager is the one of Little Rock , cause his office gives the least amount of money (if we don 't consider non-traceable costs . Yet , in to be more accurate , it is necessary to estimate not simply the absolute indicators of revenue , but efficiency , i .e . relative indicators . The best way to do so is to determine the percentage of traceable costs to the overall billings . The table below provides the estimation

New York Chicago Paris Little Rock

Traceable costs /revenue 0 ,65 0 .62 0 .82 0 .5 Thus , we can see that the least efficient work is shown by Paris office cause its overall traceable costs are too high to enable the office to get income even despite the fact that its overall billings are substantial . The most efficient work is shown by small experimental Little Rock office with the lowest traceable cost percentage of 0 ,5 or 50

Therefore , taking into account another indicator , it is reasonable to assume that the evaluation based on the consideration of non-traceable costs appears to be correct 1 . Manager in New York 2 . Chicago 's manager 3 . Little Rock manager 4 . Manager of Paris

Which method provides for more goal congruence ? Why

Considering the traceable costs in evaluating office 's performance has one shortcoming...