YSL Marketing Research is a small firm conducts focus group meetings and mail opinion surveys. The YSL’s partner Connie Bachmann has been asked to conduct a survey for Surenex that has the potential to be a valued long-run client. And the firm willing to pay YSL’s normally billing rates.
2.0 Answer the question (a)
The full cost of the Surenex engagement including indirect costs and direct costs. Direct costs consist of travel cost and cost of conducting surveys. In the case, direct cost means direct charge is about $3,000. The professional compensation charges include partner $4,800 and professional staff $4,000. Each of engagement receives an allocation of overhead based on professional compensation charges. The data of …show more content…
The lowest amount that Connie can bill calculation $ $
Direct charge 3,000
Partner salary 4,800
Staff salary 4,000
1.5 times professional compensation 8,800
(1.5 x 8,800) 13,200
4.0 Answer the question (c)
This question requires we find out some aspects that we did not consider in previous analysis. Surenex is a new high-tech company that may end up being a large hot company with premium billing opportunities in three to five years. To build cooperation relationship with Surenex is good for YSL long-term development, but also the company need to take a certain risks.
From the case, we know on the most jobs, the normal rate is 1.5 times of YSL’s fee. But Connie wants to quote a low fee since Surenex has cash-flow problems. In other words, the company may give a discount for example 1.4 times fee or lower charge for Surenex. There are two aspects to analysis. In short-term, YSL may loss profit to undertake this engagement and give up bid 1.5 times compensation on other jobs. And YSL need reject other potential clients that may reduce the goodwill of the company. YSL is in high demand; it may miss some good