The W 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 $280/hour

Senior Engineer $220/hour

Associate Engineer $200/hour

Staff Engineer $160/hour.

The two divisions expect to bill the following hours:

Water- 12000 hours, vice president at 15% of the time, 20% of Senior Engineer 10% to assoicated enginneer tand remaining to Staff Engineers.

Infrastructure- 4000 hours, vice president at 12% of the time, 20% of Senior Engineer 5% to assiocated enginner and remaining to Staff Engineers.

The Direct Labor costs per hours are as follows:

Vice President $99/hour

Senior Engineer $77/hour

Associate Engineer $62/hour

Staff Engineer $53/hour.

The utilization for each staff members are as follows:

Vice President 65%

Senior Engineer 80%

Associate Engineer 85%

Staff Engineer 92%.

The company has the following other costs:

AdminSalaries $181,000

software 20000

CEO 150000

Rent 125000

Utilities 16000

Benefits 75000

Note: Assume that all employees are on salary and they are employed for 2080 total hours per year.

Project:

You are an outside consulting firm and the company Board and the CFO have engaged you. The ultimate goal of the Board and the CFO is to improve profitability. To accomplish that the following questions should be answered in the write up. The report should be something that would be given to a Board of Directors and a CFO.

(1) Develop an Income Statement budget for the company and the two divisions. All overhead costs can be allocated using percentage of revenues for each division.

(2) Develop a staffing plan based on the expected hours to be billed. This means, how many of the various staff types should be there to accomplish the set goals.

(3) What can the company do to allocate costs differently to the divisions? Prepare a revised Income statement by division.

(4) Calculate the breakeven revenue

(5) If the company wants to make a profit of $3M how much revenue would it need? (Assuming all costs stay the same including labor.