Finnegans Gardens Case Solution

Case Solution

This case provides students by getting an opportunity to learn to evaluate costs and profit within the service-line level. Students can allocate general and administrative costs to service lines in lots of other ways and so are specific at considering drivers of overhead expenses inside the allocation process. Furthermore, students needs to be challenged to talk about whether it even is smart, in this particular setting, to allocate all the general and administrative costs. Finally, students are asked for to calculate the incremental contribution margin percentage for each service line, and find out which service line(s) Finnegan have to grow.

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?