Studying The Current Trends In The Computer Services Industry

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Part Two Number 3
A. Fsa
B. As a manager, we would like to monitor the current trends in the computer services industry. We believe that this could be a very profitable industry for Dell in the near future that they could take advantage in. We would also like to monitor the personal industry and how we can keep and convert more consumers to buy from Dell. Dell has a strong presence in the personal computer industry already, but we would like to monitor it to make sure they can keep their strong records. As for ratios, we would like to monitor the net profit margin, debt to assets, and inventory turnover. We would like to monitor the net profit margin to make sure that it continues to increase over the next few years. We want to watch the debt to assets ratio because that tells us the proportion of total assets that creditors finance. This ratio is currently high and we would like to see it decrease over the next years. The inventory turnover is important to monitor because it tells us how frequently inventory is bought and sold during the year. We would also like to monitor some of our competitors to make sure that we stay ahead of them in future years.
C. The main variable costs that Dell has to deal with are its costs of components, wages of workers, and miscellaneous components for its products. Some of Dell’s fixed costs are the building rents, utilities, and insurance. We believe that Dell uses a job order costing because they create personal computers for consumers that vary with each order. We do not believe that Dell should change their cost structure because it creates unique products that are customized to the needs of the customer. If they were to change their cost structure, it would dramatically increase their costs because they would have to change the products after to fit to each customer’s needs.
D. Dell Inc. uses a Corporate Bonus Formula which is an incentive to make more money. They use Target Annual Incentive x Corporate Performance Modifier x Individual Performance Modifier = Annual Incentive Payout. Dell Inc. also uses long term incentives and Business Unit Performance in the Definitive Proxy Statement used by management. They are assigned a performance scorecard with goals relating to business unit revenue, adjusted operating income, cash flow contribution, relative unit growth (based on IDC data), net
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