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Topic: Miscellaneous
Number of pages / Number of words: 2 / 528
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Primus has an opportunity to recoup some of it fixed costs while having the potential to earn future revenues if it performs the job to Northwood's satisfaction. Primus should accept the contract, but have Northwood sign a letter of confidentiality in regards to the price of the contract.

Exhibit 1

Classification Hours Rate Amount

Partner 100 $250 $25,000

Senior consultant 200 $150 30,000

Staff consultant 200 $80 16,000

Travel costs 15,000

Overhead @ $20 per hour 8,000

Total $94,000

Exhibit 2

Revenue: Consulting Contract $85,000


Travel costs 15,000

Variable overhead

(400 non-partners hours x 10% x $20 per hour) 800

Incremental profit $69,200

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Primus is a consulting firm that focuses on process reengineering and quality improvement initiatives. Northwood Industries, a potential client, has asked Primus to perform a study at a fee rate lower than the normal standards. Historically Primus has billed clients for consulting time at standard flat rates plus actual travel costs and estimated overhead...

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