Refer to Exercise 12-29.

Compton Associates is an architectural firm that has been in practice only a few years. Because it is a relatively new firm, the market for the firm's services is very competitive. To compete successfully, Compton must deliver quality services at a low cost. Compton presents the following data for 2016 and 2017.

Architect labor-hour costs are variable costs. Architect support costs for each year depend on the Architect support capacity that Compton chooses to maintain each year (that is, the number of jobs it can do each year). Architect support costs do not vary with the actual number of jobs done that year.
Required
1. Calculate the operating income of Compton 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?

Transcribed Image Text:

2016 2017 1. Number of jobs billed 2. Selling price per job 3. Architect labor-hours 4. Cost per architect labor-hour 5. Architect support capacity (number of jobs the firm can do) 6. Total cost of software-implementation support 40 50 30 0000 24,000 S35 60 $168,000 7. Software-implementation support-capacity cost per job (row 6row5)$2,800 27,000 S36 60 S180,000 3,000