What will be the effect on profit of hiring a site supervisor for $X who will be able to reduce direct costs by ▲Y% ? |
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Previous period total sales: |
% Sales |
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Previous period Direct Job Costs (Cost of Goods Sold): |
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Previous period Fixed Costs (Operating and Overhead): |
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Previous period Break-even Sales: |
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Previous period labor as % of direct job costs: |
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Previous period materials as % of direct job costs: |
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Fully-loaded annual cost of a Site Supervisor ($X): |
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Expected reduction in direct labor costs with Site Supervisor (▲YL%): |
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Expected reduction in direct materials costs with Site Supervisor (▲YM%): |
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Adding the additional overhead will increase Fixed Costs to: |
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New Break-even Sales with addition of Site Supervisor: |
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Change in previous Break-even Sales with addition of Site Supervisor: |
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This analysis assumes that sales remain static. Continue adjusting the "Reduction in direct labor costs (YL%)" and "Reduction in direct materials costs (YM%)" to find the percentage reduction required to pay for new hire. When "Adjusted cost of hiring Site Supervisor" approaches $0, you've found the percentage improvement required to afford the hire. Now you have to decide if it is reasonable to expect that reduction amount. |