Using the Activity-Based Costing (ABC) method, please calculate whether the smaller or larger projects are more profitable.

u

Exhibit 1 Survey Masters LLC Pro Forma Income Statement for the Year 2006 (Rounded) 120 Projects completed Project revenue Salaries $2.800.000 $ 800,000 1,400,000 Overhead expenses Total expenses 2,200,000 $ 600,000 Net income Source: Casewriter. Exhibit 2 Survey Masters LLC Pro Forma Income by Project Size for the Year 2006 (Rounded) Panel 2A Prepared by Linda Evans Projects completed Project revenue Project salaries Overhead allocated (based on project salaries Net income Largest 20 Projects $1,300,000 (400,000) Smallest 100 Projects $1,500,000 (400,000) (700,000) $ 200,000 (700,000) $ 400,000 Panel 2B Prepared by Linda Evans Projects completed Project revenue Project salaries Overhead allocated (based on project salaries Net income Largest 60 Projects $1,950,000 (600,000) Smallest 60 Projects $850,000 (200,000) (1,050,000 $ 300,000 $ (350,000) $ 300,000 Exhibit 3 Survey Masters LLC Analysis of Overhead Expenses for 2006 Overhead by Survey Phase Survey proposed and design (160 trips) Data collection and tabulation (4,200 days) Analysis and report preparation (1,300 pages) Total overhead $ 640,000 370,000 390.000 $1,400,000 Overhead by Project Size Largest 20 Projects Smallest 100 Projects Survey proposed and design Data collection and tabulation Analysis and report preparation 50 trips 600 days 250 pages 110 trips 3,600 days 1,050 pages