Ronaldo Associates is a construction engineering firm that prepares detailed con- struction drawings for single family...

Transcribed Image Text:

Ronaldo Associates is a construction engineering firm that prepares detailed con- struction drawings for single family homes. The market for this service is very competitive. To compete successfully Ronaldo must deliver quality service at low cost. Ronaldo presents the following data for 2016 and 2017. 13.1 TRY IT! 1. Number of jobs billed 2. Selling price per job 3. Engineering labour-hours 4. Cost per engineering labour-hour 2016 2017 400 500 $ 3,200 $ 3,100 24,000 27,000 $ 35 $ 36 600 600 $192,000 5. Engineering support capacity (number of jobs the firm can do) 6. Total cost of engineering support (space rent, equipment etc.) 7. Engineering support-capacity cost per job (row 6 row 5) $180,000 $ 300 $ 320 Engineering labour-hour costs are variable costs. Engineering support costs for each year depend on the engineering support capacity that Ronaldo chooses to maintain each year (that is, the number of jobs it can do each year). Engineering support costs do not vary with the actual number of jobs done in a year. Required 1. Calculate the operating income of Ronaldo Associates in 2016 and 2017. 2. Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2016 to 2017. 3. Comment on your answer in requirement 2. What do these components indicate? Ronaldo Associates is a construction engineering firm that prepares detailed con- struction drawings for single family homes. The market for this service is very competitive. To compete successfully Ronaldo must deliver quality service at low cost. Ronaldo presents the following data for 2016 and 2017. 13.1 TRY IT! 1. Number of jobs billed 2. Selling price per job 3. Engineering labour-hours 4. Cost per engineering labour-hour 2016 2017 400 500 $ 3,200 $ 3,100 24,000 27,000 $ 35 $ 36 600 600 $192,000 5. Engineering support capacity (number of jobs the firm can do) 6. Total cost of engineering support (space rent, equipment etc.) 7. Engineering support-capacity cost per job (row 6 row 5) $180,000 $ 300 $ 320 Engineering labour-hour costs are variable costs. Engineering support costs for each year depend on the engineering support capacity that Ronaldo chooses to maintain each year (that is, the number of jobs it can do each year). Engineering support costs do not vary with the actual number of jobs done in a year. Required 1. Calculate the operating income of Ronaldo Associates in 2016 and 2017. 2. Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2016 to 2017. 3. Comment on your answer in requirement 2. What do these components indicate?

Answer rating: 100% (QA)

1 Operating income for 2016 and 2017 2016 Number of jobs 400 Selling price per job 3200 Revenue 400 ... View the full answer