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San Francisco Bay Consulting

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Submitted By nd612
Words 1534
Pages 7
San Francisco Bay (SFB) Consulting
Simulation Requirements

1. Evaluate SFB’s current approach of treating Computer Services as a modified profit-center.
Please refer to the Appendix below that I have created for details on how monthly rental rates and usage charges are developed by Computer Services and then charged to Consulting Groups.

San Francisco Bay Consulting practical application of economic theory to business problems SF bays practice was divided into two groups – Business Consulting and Litigation Support (both relied heavily on quantitative economic analysis)

Computer services: the firm evaluated it as a modified profit center, which they called a “breakeven” center. Budget included all expenses that CS expected to incur for the year, including salaries, supplies, purchased software, and hardware depreciation. Revenue included expectation for internal billings from CS to groups for hardware “rented” by the consulting groups, and for usage charges levied on the groups for disk storage, laptops, and SUN usage. As long as the budget showed a projected break-even position at the end of the year, and the internal billings were realistic it was approved. CS’s expenses could be over budget as long as the internal billings were above expectations by the same amount and the break-even position was maintained Computer service actual revenue was determined by how much the groups used, given CSs billing rates Computer services performance assessment was based on how well actual revenues matched actual costs rather than factor in complaints issues by frustrated consultants Internal billings (transfer prices) from CS to groups were of two types: a monthly rental charge levied at the group level and a usage charge levied at the project level

Profit Center
A profit center is a part of a business that generates revenue while also taking on its own costs,

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