Blake Furniture Inc maintains an Account Rec Dept. that currently employs eight people. Blake is interested in doing an activity analysis because an outside firm has offered to take over a portion of the activities currently handled by the Accts Rec Dept. The 4 main activities handled by the dept are 1)billing recording payments 2)customer service activities 3)financial reporting and analysis 4)collecting delinquent accts.
The salaris paid to the dept employees are as follows:
- Manager 1 @ $60,000 per year 60,000
- Clerks 5 @ 30,000 per year 150,000
- Acct specialists 2 @ 40,000 per year 80,000
- Total 290,000
It is estimated that the manager of the Acct Rec Dept spends an equal amt of her time supervising the 4 main activities. The clerks spend approx half of their time on billing and recording payments. Their remaining time i divided equally between reporting activities and cust service. The 2 acct specialists spend half of their time on delinquent acct activities and the rest of their time is split equally between financial anaylsis activities and customer service activities that the clerks are not qualified to perform.
Paypro, Inc. has proposed that it can perform all activities related to collecting delinquent accts for a fee of $50,000 per year. The manager of Paypro argues that Blake can save $30,000 because the $80,000 in salaries paid to the specialist who currently handle all delinquent accts can be eliminated. If the contract is accepted it is estimated that the manager of the Acct Rec Dept would need to devote a quarter of her time to dealing with Paypro employees..
A-Using the information given prepare an activity table to calculate the labor cost for personnel devoted to each of the 4 main activities of the Acct Rec Dept
B-Should Blake accept Paypros offer to take over its delinquent acct activities