Activity analysis
The cost of system support department (SS) department (and other service
departments) of Clark paper products inc. have always been charged to
the three business divisions of management, lumber products and paper
products) based on the number of employees in each division this measure
is easy to obtain and updated and until recently none of the divisions
had complained about the charges the paper products division has
recently automated many of its operations and has reduced the number of
it’s employees at the same time ,however to monitor its new process
paper products have increased its requests for various reports provided
by the SS department cost passed on activity analysis of possible cost
drivers cost analyst have suggested using the number of reports prepared
as means of charging for SS costs and have gathered the following
information
Forest
management lumber products paper products
2000 Number of employees 762
457 502
2000 Number of reports 410
445 377
2000 SS costs: $ 300,000
2001 Number of employees 751
413 131
2001 Number of reports 412
432 712
2000 SS costs: $ 385,000
Discuss the plausibility and probable reliability of each of the cost
drivers – number of employees or number of reports?
What are the 2000 and 2001 SS costs per unit of cost driver for each
division using each cost driver? Do the forest management and lumber
products divisions have legitimate complaints? Explain
What are the incentives that are implied by each cost driver?
Which cost driver should Clark paper products use to charge its division
for SS service? For other services? Why?
Business Homework Solutions
#16990
3745- activity analysis
Activity analysis
The cost of system support department (SS) department (and other service departments) of Clark paper products inc. have always been charged to the three business divisions of management, lumber products and paper products) based on the number of employees in each division this measure is easy to obtain and updated and until recently none of the divisions had complained about the charges the paper products division has recently automated many of its operations and has reduced the number of it?s employees at the same time ,however to monitor its new process paper products have increased its requests for various reports provided by the SS department cost passed on activity analysis of possible cost drivers cost analyst have suggested using the number of reports prepared as means of charging for SS costs and have gathered the following information
What is this?
By OTA - Overall OTA Rating
Shamel Addas, MBA (IP) - 4.6/5
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