Case ID: UV1706
Solution ID: 2441
Words: 1111
Price $ 75

Finnegans Gardens Case Solution

Case Solution

The main subject of this case is the costs and the profitability at the level of the service lines. The students will have the opportunity to allocate the costs to the service departments in a variety of ways. The consideration in this allocation would be the overheads and the drivers of such expenses. The students will also be tested to assess if the allocation of the costs should be done entirely on the administrative and general costs. The quantitative marginal percentage has to be calculated and analyzed. The recommendation would include the determination of the service lines that need to be expanded.

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?