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CLK Marketing Case chapter 3

CLK Marketing Case chapter 3 - CLK Marketing has been asked...

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CLK Marketing Case – chapter 3 CLK Marketing is a small firm located in Atlanta. On behalf of its clients, the firm conducts focus group meetings, telephone and mail opinion surveys, and evaluations of marketing strategies. The firm has three partners and six non partner professionals. At the start of the year, the company estimated total professional (partner and non partner) compensation to be $1,200,000. To evaluate the profitability of its engagements, the firm traces actual professional compensation to each engagement along with “direct charges”. Direct charges consist of travel costs and costs of conducting surveys (paper, postage, etc). In addition, each engagement receives an allocation of overhead costs based on professional compensation charges. Overhead consists of all support costs including rent, utilities and depreciation of office equipment. At the start of the year, those costs are estimated to total $360,000.
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Unformatted text preview: CLK Marketing has been asked to conduct a survey for a new company. The new company is looking for low-fee services. CLK usually charges a rate of 1.5 times the professional compensation plus direct charges. The engagement will require the following costs: Partner services 40 hours x $100 $4,000 Non partner services 100 hours x $30 $3,000 Direct charges $2,000 Total $9,000 Calculate the full cost of the engagement (including the allocation of overhead) What is the opportunity cost of accepting this engagement assuming the new company is willing to pay $100 above cost and another customer with the same requirements is willing to pay the usual fee? Is there any circumstance under which CLK should accept the engagement for the lesser fee?...
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