As a few minutes to as much as several hours, depending on the claim's complexity. While Liberty management agrees that 12 clerks are not sufficient for a month with 1,000 claims, it notes that most months require that only 800 claims be processed. Management concludes, therefore, that 12 clerks are about right. Assume that each clerk works an eight-hour day except for 40 minutes of break time and that each month has an average of 22 working days. In the most recent month, January, the department processed 915 claims.

Required

1. What type of SBU does Liberty management appear to use for the claims processing department?

2. Assuming that Liberty uses the discretionary-cost method to implement cost centers, what is the budgeted cost in the claims department for January?

3. Assuming that Liberty uses the engineered-cost method to implement cost centers, what is the budgeted cost in the claims department for January?

4. If you were Chuck Davis, what would you use as a more effective argument to top management in requesting additional clerks?