Finnegans Gardens Case Solution

Case Solution

This case provides students by having an chance to learn how to evaluate costs and profit in the service-line level. Students are able to allocate general and administrative costs to service lines in many various ways and therefore are targeted at thinking about motorists of overhead expenses within the allocation process. Additionally, students ought to be challenged to go over whether or not this even is sensible, within this setting, to allocate all of the general and administrative costs. Finally, students are requested to calculate the incremental contribution margin percentage for every service line, and see which service line(s) Finnegan need to grow.

Excel Calculations

Shared Expenses Based on FTEs

Shared Expenses Based on Direct Labor Cost

Shared Expenses Based on Direct Labor and Material Cost

Shared Expenses Based on Direct Labor and Material Cost

Earning Statement by Service Lines ( 10% increase in Revenues and Volume of all three services)

Earning Statement by Service Lines ( 10% increase in Revenues and Volume of Design services)

Summary of Expansion Scenarios

Questions Covered

1- Using the information given in the case, allocate the company’s shared costs to each service line four different ways: based on FTEs, direct-labor costs, direct labor plus direct materials, and the specific usage information given to Finnegan by Bennett.

2- Calculate the profit percentage for each service line under each overhead-allocation method. 
 
3- Which service line is the most financially attractive? Does the fact that design and installation clients often use Finnegan’s Gardens for maintenance services change your answer?
 
4- Assume volume and revenues for each service line could grow by 10%. Which service line should Finnegan expand? Is your answer congruent with your answer to Question 3? Why or why not?