Case 7-1
1. Based on the tables and numbers given, the company may measure the outcome of the effect of accepting the Northwood job offer on their profit. The company can use Incremental profit/loss formula to measure the effect of accepting Northwood job to their profit.
From existing data, the calculation can be measure as following
Incremental revenue from Northwood project: $75000
Total Wages = Partner wages + senior consultant wages + staff consultant wages
= (90 x $250) + (125 x $150 ) + (160 x $80 )
= $22500 + $18750 + $12800
= $54050
20% Overhead Cost (variable cost) = 20% x $8550 = $1710 Incremental Cost = Total Wages + travel cost + 20% of overhead cost = $54050 + $18750 + $12800 = $76760
Incremental profit/loss =
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accepts the job, the competitor will not happy because their will loss potential customer which is mean also decrease the competitors income.
- If Primus Inc. rejects the job, Competitors will happy because they can take the jobs to gain more income. Moreover, competitors may create good long-term relationship with Northwood Company that will give benefit for both company (Northwood and competitors).
b. Customer (Northwood company)
- If Primus Inc. accepts the jobs, customer will happy because their project will be done by primus with existing budget. Moreover Customers no need to seek other company to do their job. Moreover the primus also can build good long-term relationship with the Northwood. Having good long-term relationship with Northwood will increase the chance of getting another jobs from Northwood Inc.
- If Primus Inc. reject the jobs, the customer will unhappy because will increase their cost to research and seek other company that want to take over their job.
C. Manager / Management
- if Primus inc. accept the jobs, manager/management will feel unhappy because they will suffer loss of $1760.
- If Primus inc reject the job, manager will happy because they will not loss any
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A. Improve the technology: Advanced technology have crucial role right now in each industry or manufacturing business. Having advanced technology, really help an industry to produce more and faster than before. Therefore, use of technology will help five star tools company to accelerate their production in the process of coating and sharpening the blade of each their products. However to improve the technology, definitely will need a lot of cash to be allocate to buy newest technology.
B. Train the employees: Five stars tool company may give training more about how to do coating and sharpening tools efficiently to cut off the time needed. Moreover, this method is used to support the first method. By training the employees can do the jobs with the latest technology. Improvement of technology will not effective if the employees don’t know how to use the technology, therefore education and training is needed.
C. Ask to other company to do the job/ buying service: it can be last choice for five stars tools to loosen the limitation in coating and sharpening. Buying the service means company offer jobs to the other company to assist five star tools to do process of coating and sharpening. This method, company must find the other company that has capacity and better technology to do the process of sharpening and coating. However the five stars tools must calculate properly the cost of this method. If the cost gives more profit to the five stars Tools, company may buy the service