(08)_APADMS_2510_Winter_2009_Final_Examination

All costs related with hiring activities are

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Unformatted text preview: ting and Finance 20 Information Technology 20 Marketing and Sales 50 Production 130 Because of increased demand for hiring services, the hiring division incurred overtime expenses. All costs related with hiring activities are allocated to the various departments of Brinkman Corp. and the hiring division is proposing the following amounts for 2008 based on an actual average allocation rate: Accounting and Finance $26,000 Information Technology $26,000 Marketing and Sales $65,000 Production $169,000 Immediately after the memo with the proposed allocation of costs was circulated the IT manager expressed serious misgivings about the costs allocated to her division: ”I do not think the cost allocation system of the hiring division is fair. Why should I be held accountable for someone else’s efficiency or someone else’s level of consumption?” REQUIRED: Following a proper case format address the concerns of the IT manager. Specifically consider whether the cost allocation system is fair. What alternatives could you suggest to improve the way costs are allocated in the hiring division of the Human Resource department and performances evaluated at Brinkman? Proposed solution 2008 budget A&F IT M&S Prod. total costs $ 240,000 cost allocation 25 20 Cost per hire 25 $ 1,200 130 200 $ $ $ $ $ 30,000 24,000 30,000 156,000 240,000 HHRR proposal A&F IT M&S Prod. 2008 total costs actual $ 286,000 20 20 Cost per hire 50 $ 1,300 130 220 Cost allocation $ $ $ $ $ Cost diff. 26,000 26,000 65,000 169,000 286,000 $ $ $ $ $ (4,000) 2,000 35,000 13,000 46,000 Attempt solution with flexible budget: Actual quantities x budgeted costs Rationale: each department controls the demands for hirings mostly HHRR controls the costs of hirings actual flexible hirings cost total hirings cost total hirings 20 $ 1,300 $ 26,000 20 $ 1,200 $ 24,000 25 20 $ 1,300 $ 26,000 20 $ 1,200 $ 24,000 20 50 $ 1,300 $ 65,000 50 $ 1,200 $ 60,000 25 130 $ 1,300 $ 169,000 130 $ 1,200 $ 156,000 130 220 $ 286,000 220 $ 264,000 200 A&F IT M&S Prod. budgeted 25 20 25 130 $ 30,000 $ 24,000 $ 30,000 $ 156,000 allocated (flex) 20 $ 24,000 20 $ 24,000 50 $ 60,000 130 $ 156,000 Satisfied Yes Yes Probably not Yes Hirings diff. -5 0 25 0 20 budget cost total $ 1,200 $ 30,000 $ 1,200 $ 24,000 $ 1,200 $ 30,000 $ 1,200 $ 156,000 $ 240,000 Cost diff. $ 6,000 $ $ (30,000) $ - Hirings diff. 5 0 -25 0 Suggested Marking key: Introduction: 2 Issue/problem identification: 1 Analysis: quantitative 5 Qualitative 2 Alternatives: 2 Recommendation: 2 Proper format and professional style: 1 Case report tests (1 mark for each question) The recommendation: Solves the problem? Uses the analysis? Is derived from the alternatives? Is based on theory? Makes business sense?...
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