Case - 7-1 Primus Consulting

Background Primus is a consulting firm that focuses on process reengineering and quality cash advance initiatives. Northwood Industries, a authority client, has asked Primus to perform a study at a fee rate lower than the standard standards. historically Primus has billed clients for consulting time at standard flat grade plus actual travel costs and estimated overhead. Primus is considering accepting the undertaking because it has capacity (i.e. available staff) to take on the modern sire with out having to hire any new employees. Issues Primus has to determine if move in a project, that is estimated to create a net leaving of $9,000, is a good decision. What will be the overall issuance to P/L to Primus if they accept the contract? Analyzing Primus cost structure, what sack up be considered to help justify our decision of accepting verses rejecting the adjure? Analysis If we analyze Primuss cost structure (Exhibit 1) we can determine that Primus would contrive travel costs of $15,000. Based on the information allow overhead is calculated at the beginning of the year from an yearly overhead budget of $1,600,000 divided by the total estimated non-partner hours of 8,000 and throw 10% to calculate the variable costs. As calculated in Exhibit 2, we have determined that variable costs touch $800.

Thus if Primus accepts the contract, they will earn an incremental profit of $69,000. Conclusion in the lead accepting or rejecting the job with Northwood Industries, Primus has to first consider a few qualitative factors. By accepting the contract Primus has the prospect to perform a service to a brand new client. Even thought Primus is not able to charge its normal market rate, this one job can lead to separate more profitable jobs down the road with Northwood or with some(a) of Northwoods affiliates. On the flip side of the argument, should Primus accept the contact they could in fact be setting an negative precedent. If other potential clients or existing clients hear of... If you want to get a full essay, order it on our website: Ordercustompaper.com

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