Australia Post Case Study.docx

Australia Post Case Study.docx - Case Study(Australia Post...

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Case Study (Australia Post) Question 1. Identify three major operating costs for Australia Post to run its traditional letter mailing business and classify them either as variable cost or fixed cost. For variable cost, please also point out the most appropriate cost driver. a) Three major operating costs in the mail delivery business of the Australian Post are payroll for casual and full-time employees, depreciation on office plant and equipment, and supply of paper envelops. Depreciation is a fixed expense and is not theoretically dependent on a cost driver. The supply of envelops used for the mailing of letters is variable and the cost is driven by the number of customers that still come into the stores and mail physical letters. The payroll cost is an example of what could be considered a semi-variable cost, having both fixed and variable components. Full-time employees, or those receiving salaries, could be regarded as being fixed and having no major cost drive. Whereas, casual or wage earners with smaller roles such as motorcycle mail carriers or in-store mail staff needed are variable and driven by the number of letters being mailed in a period. b) One of the major operating costs is the cost of purchasing property with which post offices will operate on. This is a step fixed cost because, while the population increases and the need for more post offices increases more property must be purchased, however this cost of property does not necessarily increase as postal activity itself increases. Another major cost is the transport costs of moving letters and post around the country. This is a variable cost that is assume will mostly directly change in response to the cost driver which is the need and amount of post that is sent.
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  • One '14
  • Economics of production, Australia post

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