1. Data Services, Inc. Huynh Thanh Phong – M987Z242
Nguyen Thi Thanh Nhan – M987Z232
Hoang Thi Ngoc Huyen – M987Z239

2. Armistead Insurance Company
COMPANY BACKGROUND
Armistead Insurance Company
A large company by industry standards.
Had experienced substantial growth over the past 20 years
One of the first companies to automate its operations.
By 1990, it was operating two large, leased IBM computer. These computer usually operated close to capacity for two shifts, but the company had never been successful at getting its managers to schedule work for the third shift->a large block of largely idle time.
Data services
would find profitable uses for this third-shift computer time without interfering with the processing of normal operation.
Provides data processing services designed especially for the fast-food industry, provide a comprehensive analytical service to those companies in the very competitive fast-food industry that could not afford to perform the function for themselves.

3. CURRENT DATA SERVICES PERFORMANCE
Sales
Innitial installation of services
Various data summaries
Continuing operations
Revenue from the sale of paper forms to customers
Competitor
it was generally agreed that Data services faced only one competitor
A subsidiary of the nation’s largest fast-food chain
had been established several years previously to provide computer services to its own outlets.
It had standardized its operations and had degun marketing its service to other fast-food chains in 1980
In 1993, sales: were about 3 times as great as sales of Data services.
The rate charged: were comparable to the rates charged by Data services.

4. SALES AND MARKETING Sales
Data services ‘s top managers and their staffs performed Sales duties in addition to handling their general-management responsibilities.
They had recruited the 14 new customers acquired during the past fiscal year,
They had no established procedures for soliciting customers.
The managers spent a majority of their time visiting prospective buyers (average: 3 visits to a customer before one cooperation, spent 75% of working times on the selling function)
After a sale was made, on average an agent spent approximately 1 day each month with a new customer during the three months of the system implementation.
Occasionally: the system would have to be modified to meet the needs of a new customer.
Fee: Data services was charge for their use of times of the corporate units
A one-time charge per shift-reporting unit was made to each new customer in addition to the regular monthly rate -> this fee partially offset the costs of installation incurred by Data Services.

5. SALES AND MARKETING Marketing
Policy: grant volume discount to new customers based on the number of shift-reporting units in the customer’s systems
In practice: the discounts were not applied uniformly.
They were not updated to confirm changes in the number of shift-reporting units per customer

6. OPERATION
Process: The company received sales and operations data from its restaurant customers enter that data into its files.
processed data, making calculations of averages and trends.
the reports, usually issued monthly
gave customer managers information about their labor and material costs and identified trends in these cost.
analyze the historical performance of any shift at any location, compare shifts within the company, and compare the company performance relative to the overall fast-food industry.

7. OPERATION
As monthly data were received from customers, the data were keypunched and fed into the computer. The file were updated, and reports were run.
Data control use a continuous process of manual of documents to detect any recording errors or computer malfunctions. Programmer continually performed program maintenance to fine-tune the system and to assure a smooth flow of information to all customers.
The service agents, in addition, periodically visited all customers and performed a supervisory and trouble-shooting function.
Each regular customer was visited about once a month.
For some special report that customer would ask occasionally, data services was happy to apply and then, were billed on a cost basis for those supplies.

8. Table 1: Results of Operations for the Year Ending Sep
Table 1: Results of Operations for the Year Ending Sep. 30, 1993 (in thousands of dollars)
Sales :
Sales and installation
800
Data
320
Continuing operations
6.400
Forms
480
8.000
Expenses :
Data entry
2.000
Service agents
1.000
Selling and general management
1.800
Computer
Travel
1.200
Data control
600
Programming
520
400
General and administrative, including postage and communications
Rent, depcreciation of office equipment
360
10.760
Profit ( loss)
(2.760)

9. Distribution of Expenses
Service Agents
Continuing Operations
Ave. Number of customers over year = 32 +(1/2 x14) =39
39 customers x 12 visits = 468 visits
Installation
14 new customers x 3 visits = 42 visits
Total visits = = 510 visits
$1,000,000/510 visits = $1,961 per visit
To continuing operations: 468 x $1,961 = $920,000
To sales and installation: 50 x 42 = $80,000

10. Distribution of Expenses
Selling and general management
75% of management and staff time x$1,800,000 = $1,350,000
$1,350,000 to sales and installation
$450,000 not allocated

11. Distribution of Expenses
Travel
Management (Selling)
Service agents (installation)
14 customers x 3 visits = 42 visits
Service agents (continuing operations)
39 customers x 12 visits = 468 visits
Total = = 804 visits
Expense per visit: $1,200,000/804 = $1,493
To continuing operations: 468 X 1,439 = $ 700,000
To sales and installation: 1,200,000 – 700,000 = $ 500,000

12. Table 2: Analysis of Revenue and Expenses (in thousands of dollars)
Items
Expenses not allocated
Data
Forms
Sales & installation
Continuing operations
Varies with of customer
Varies with of shifts
Total
Sales
$320
$480
$800
$6.400
Expenses :
Data entry
$400
Service agents
$80
$1.600
Selling and general management
$450
$1.350
$920
Computer
Travel
$500
$700
Data control
$200
Programming
$120
General and administrative
Rent & depcreciation
$360
$2.730
2020
$2.800
4820
Profit ( loss)
$2.410
($80)
($1.930)
$1.580
Total Profit (Loss)
(2,760)

13. Table 3: Keep or Drop Decision (in thousands of dollars)
Items
Keep
Drop　
Incremental
Sales
8.000
(8.000)
Expense
Data entry
2.000
(2.000)
Service Agents
1.000
(1.000)
Sell and general management
1.800
(1.800)
Computer
1.600
(400)
Travel
1.200
(1.200)
Data control
600
(600)
Programming
520
(520)
Forms
400
Data
General and Admin
480
(480)
Rent & depreciation
360
10.760
1.960
(8.800)
Profit (loss)
(2.760)
(1.960)
800
If Data Services Inc. stops its operation, the company loss will decrease by $ 800,000

14. If Data Services Inc. stops its operation, the company loss will decrease by $ 800,000
However, We also consider other alternatives for its operation. When we analyzed the expenses, we saw that the amount of expenses for continuing operations is large and can be reduced. So we suggest 3 alternatives on the reduction of this sort of expenses.

15. Table 4: Distribution of Expenses with 3 New Alternatives of Continuing Operations
Items
1 month/ visit
1.5 months/visit
2 months/visit
3 months/visit
Visits/ year 12 8 6 4
Service agent
Continuing Operation
$ 920,000
$ 611,830
$ 458,870
$305,920
Sales and installation
$ 80,000
$ 80,00
Total
$ 1,000,000
$ 691,830
$ 538,870
$ 385,920
Travel
$ 700,000
$ 465,82
$ 349,36
$ 232,91
$ 500,000
$ 1,200,000
$ 965,820
$ 849,360
$ 732,910

16. Table 5: Profit (Loss) Calculation Including 3 New Alternatives of Continuing Operations (in thousands of Dollars)
Items
Keep
Drop
1.5 months/
visit
2 months/
3 months/
Sales
8.000
Expense
Data entry
2.000
Service Agents
1.000
Sell and general management
1.800
692
539
386
Computer
1.600
Travel
1.200
966
849
733
Data control
600
Programming
520
Forms
400
Data
General and Admin
480
Rent & depreciation
360
Profit (loss)
(2.760)
　(1.960)
(1.418)
(1.148)
(879)

17. Recommendations
It is common for a new established company not to get profit in some early years from its operations.
The drop decision of any company’s operation depends on many factors, especially company long –term strategies. In this case, we do not have enough data to suggest that the company should stop its operation.

18. Recommendations
We prefer the alternative of reducing the expenses of continuing operations to operation dropping alternative because it reduces more the loss of Data Service Inc. However, the company should do further investigation on how much expenses of continuing operations it reduce to be efficient,
Moreover, to improve its performance, it should strictly set up policies on the service fee and discount to easily control sales staff and calculate and forecast revenue.

19. THANKS FOR YOUR LISTENING