Thursday’s 6pm ET Zoom Session is titled, “Profitability”
Thursday’s 6pm ET Zoom session is titled, “Profitability”. You’ll take the first five minutes of class to answer the question alone, but if you would like to get a head-start on that, here is the assignment.
An architecture firm specializing in forensic analysis of design and construction failures is interested in growing but has more work opportunities than it can accept. The firm assigns each forensic analysis project to a team of three people: one licensed architect as the team leader, one not-yet-licensed “architectural designer,” and one support staff person. There are simply not enough three-person-teams to grow into the client demand, and the limiting constraint is the number of licensed architects in the firm. The firm employs numerous not-yet-licensed “architectural designers” with sufficient experience to be promoted to team leader, but the nature of their work and its reputation among clients requires that team leaders be licensed. The firm enjoys a 68% average utilization ratio, a 3.5 direct salary expense multiplier, and a 20% profit margin. The three team members are billed to the client as follows.
Licensed architect team lead: $115/hr
Not-yet-licensed “architectural designer”: $85/hr
Support staff: $65/hr
If the firm can get six of its not-yet-licensed “architectural designers” licensed, and therefore add six new busy teams to its roster, how much more profit will the firm generate annually. Assume 52 working weeks per year, and 40 hours per working week.
The Zoom session takes place at 6pm ET Thursdays in our Zoom link: https://us02web.zoom.us/j/83922907346
It’s free for everyone, so join us. You’ll increase your odds of passing the exam. . . Plus, it’s fun.
-
Answer:
Profit per typical 3-person team:
Licensed architect team lead: $115/hr
Not-yet-licensed “architectural designer”: $85/hr
Support staff: $65/hr
Total; $265/hr
(the net multiplier is already incorporated- It's the billable rate, not the hourly salary)
265 X 0.68 = $180.20
(the utilization rate)
$180.20 billed per team per hour
52 weeks X 40 Hours/Week = 2,080 Hours
(very typical equation for questions; know that 2080 is the amount of hours worked in a year unless otherwise notified in the question's information. For example, there was a question that stated an employee worked 2,000 hours a year, it was not a typo; they actually only worked 2000 hours/year. Every employee is different, but it's typically 2,080 hours)
180.20 X 2,080=
$374,816 Anualy
6 New teams so:
6 X 374,816=
$2,248,896
To calculate 20% profit:
0.2 X 2,248,896=
449,779.20
Final Answer: $449,779.20
Did I get it Right?
Please sign in to leave a comment.
Comments
4 comments