EX 12-28 Revenue per employee
Commerical Cleaning Services, LLC, provides cleaning services for office buildings. The firm has 10 members in the LLC, which did not change between 2012 and 2013. During 2013, the business terminated two commercial contracts. The following revenue and employee information is provided:
2013 2012 Revenues (in thousands) $20,000 $22,400 Number of employees (excluding members) 160 200
a. For 2013 and 2012, determine the revenue per employee (excluding members).
b. Interpret the trend between the two years.
Answer:
a.
Revenue per employee, 2013:
160 000,000,20$
= $125,000
Revenue per employee, 2012:
200 000,400,22$
= $112,000
b. Revenues decreased between the two years; however, the number of employees has decreased at a faster rate. Thus, the revenue per employee increased from $112,000 in 2012 to $125,000 in 2013. This indicates that the efficiency of the firm has increased in the two years, even though revenues declined. This is likely the result of the termination of two contracts. That is, the large decrease in the employment base is the likely result of the reduction in business. Thus, the business was able to reduce the workforce faster than the revenue base. This suggests that the contracts were not very efficient from a revenue per employee perspective, and thus were good candidates for termination.
2013 2012 Revenues (in thousands) $20,000 $22,400 Number of employees (excluding members) 160 200
a. For 2013 and 2012, determine the revenue per employee (excluding members).
b. Interpret the trend between the two years.
Answer:
a.
Revenue per employee, 2013:
160 000,000,20$
= $125,000
Revenue per employee, 2012:
200 000,400,22$
= $112,000
b. Revenues decreased between the two years; however, the number of employees has decreased at a faster rate. Thus, the revenue per employee increased from $112,000 in 2012 to $125,000 in 2013. This indicates that the efficiency of the firm has increased in the two years, even though revenues declined. This is likely the result of the termination of two contracts. That is, the large decrease in the employment base is the likely result of the reduction in business. Thus, the business was able to reduce the workforce faster than the revenue base. This suggests that the contracts were not very efficient from a revenue per employee perspective, and thus were good candidates for termination.
