Arthur Treidmont owns a small landscaping business in the Deep South. He can work most of the year, although in summer, his workforce slows down in response to the heat index—it is simply too hot. Arthur just hired you to look at his labor costs and profits on the six jobs his company recently finished. Three of these big jobs were done in May, the other three in July and August. Use the following information to complete your analysis for Arthur.

REQUIRED:

a. Calculate the percentage of labor cost for each job.

b. Calculate the percentage of other costs for each job.

c. Calculate the profit per job (revenue minus costs) in dollar terms and as a percent of the total revenue.

d. What does this information tell you?

e. When Arthur plans a job, he estimates labor to be 55% of the total job cost with other costs accounting for 20%, leaving him with an expected profit of 25% of the job’s revenue. Would you recommend Arthur make some changes to his planning for each job given the results of your analysis? What changes would you recommend? Why?

f. Landscaping is a very competitive business. If your answer to part (d) was to raise prices, are you at all concerned that Arthur may lose more business? In other words, are there other things he could do to ensure profitability on a job?

Transcribed Image Text:

Treidmont Landscaping Job Number Revenue from Labor Costs Job Other Costs for Job Month of Job for Job 15 April-May $7,500 $3,750 $1,875 20 May $5,000 $2,550 $1,250 23 May $3,500 $1,925 $875 35 June $8,000 $4,800 $2,000 38 July $4,000 $2,800 $1,000 42 August $2,500 $1,875 $625