Question

HARVARD BUSINESS SCHOOL 9-107-061 RENAUGET Survey Masters LLC (A) Natalie Patel and Carlos Lopez met while studying statistics together at Northeastern University in Boston. After graduation Patel had accepted a position with the largest independent marketing research firm in the United States, and lope went to work for Progressive Insurance outside Cleveland as an actuary. At their tenth class reunion in 2003 they met again. Each was somewhat unhappy in their current job, and both wanted to return to the Boston area to live. A casual conversation turned to something more serious as they discussed leaving their jobs to start a marketing research survey consultancy in the Boston area Survey Masters was founded as a partnership early in 2004. The business plan Natalie and Carlas had written called for the new company to other specialized surveys to companies that did not have internal marketing research staffs. Through hard work and some good luck in the strong economies of 2005 and 2006, the company had grown to employ ten professionals including the partners by the end of 2006. Revenues were approaching $3 million and income for 2016 was 5600,000, Loans taken to fund the early days of operations had all been repaid. The company focused on conducting surveys of consumers of existing and new products and services sold by manufacturers, distributors, and consultants. Data was collected and analyzed to provide information about demand, pricing, design, distribution channels and delivery systems. A typical project ended with a report prepared for and delivered to the client who had contracted for the work with Survey Masters. In 2006, the company had completed 120 projects. An income statement in rounded numbers for 2006 is shown in Exhibit 1. The Marketing Research Survey Process Survey Masters typically used a three-phase process in designing and conducting surveys for clients. Survey proposal and design Clients requested services or Survey Masters identified potential clients through expected need for customer preferences or information Proposals and survey design were perfected in conferences with prospective clients by company teams that traveled to the client's location to study needs and the information sought by the prospective client Data collection The survey instrument, developed during and following the design process, consisted of questions about the product or service was administered to customers or purchasing Cedrus Terms

Answer 1

1	As per the analysis by Linda Evans in Exhibit - 2
	The observations with respect to smaller projects and larges projects ar as follows:-
		The smaller projects are appearing to be more profitable than bigger projects
		because, the salary of the professionals were distributed
			equally in Panel 2A , and
			actual salary in Panel 2B
		and overheads were distributed in both panel 2A & 2B according to the salary distribution of each.
	Wheres it has to be disstributed depending upon the time and effort that was taken on the projects which
	actually varies for larger and smaller projects.
	i.e., Data collection, trips to clients location by professionals taken much expenses in larger projects
	than that of smaller projects.

2	Analysis of overheads as per Exhib 3
	Analysis of the overhead expenses depending upon the 3 phases of each project
	Phases	Survey	Data	Analysis	Total
	TTL O/H	640000	370000	390000	1400000
		trips	days	pages
		160	4200	1300
	RATE / EVENT	4000	88.0952381	300
	LARGE PROJECTS	50	600	250
	SMALL PROJECTS	110	3600	1050
	TOTAL EVENTS	160	4200	1300
	APPORTIONMENT OF THE OVERHEADS AS PER EVENT
	LARGE PROJECTS	200000	52857	75000	327857
	SMALL PROJECTS	440000	317143	315000	1072143
	TOTAL EVENTS	640000	370000	390000	1400000
	AFTER ANALYSIS OF OVERHEAD
	PANEL 3A
	Total Projects	20	100
		LARGE	SMALL
	REVENUE	1300000	1500000	2800000
	SAL	400000	400000	800000
	O/H (APP. 1 & 2)	327857	1072143	1400000
		727857.143	1472142.86	2200000
	NET INCOME	572142.857	27857.1429	600000
	PANEL 3B
	Total Projects	60	60
		LARGE	SMALL
	REVENUE	1950000	850000	2800000
	SAL	600000	200000	800000
	O/H (APP. 1 & 2)	327857	1072143	1400000
		927857.143	1272142.86	2200000
	NET INCOME	1022142.86	-422142.857	600000
	After analysis of information in Exhibit 3, it is concluded
	that taking both Larger projects and smaller projects equally is not profitable.
	Because, the net income per small project is less than large project.

3	The Survey Masters should not continue to take all projects .
	Because, the overhead expenditure incurred for smaller projects
	is very high than the bigger projects.
	They should refuse to take smaller projects in the future.
	So, they should take the bigger projects.

4	PROJECTED INCOME FOR 2007 (As per the above 3. proposal)
	Analysis of the overhead expenses depending upon the 3 phases of each project
	Phases	Survey	Data	Analysis	Total
	TTL O/H	640000	370000	390000	1400000
		trips	days	pages
		160	4200	1300
	RATE / EVENT	4000	88.0952381	300
	LARGE PROJECTS	50	600	250
	SMALL PROJECTS	0	0	0
	TOTAL EVENTS	50	600	250
	APPORTIONMENT OF THE OVERHEADS AS PER EVENT
	LARGE PROJECTS	640000	370000	390000	1400000
	SMALL PROJECTS	0	0	0	0
	TOTAL EVENTS	640000	370000	390000	1400000
	AFTER ANALYSIS OF OVERHEAD
	PANEL 3A
	Total Projects	120	0
		LARGE	SMALL
	REVENUE	2800000	0	2800000
	SAL	800000	0	800000
	O/H (APP. 1 & 2)	1400000	0	1400000
		2200000	0	2200000
	NET INCOME	600000	0	600000