Zenon Computer (a fictitious company) computers at the retail level on the basis
ID: 2490112 • Letter: Z
Question
Zenon Computer (a fictitious company) computers at the retail level on the basis of customer service. It has invested significant resources in its customer service department. Recently the company has installed a traditional activity-based casting (ABC) system to provide better-quality cost information for pricing decision making, and customer profitability analysis. Most of the cost of running the customer service department are considered committed (i.e, short-term fixed) costs principally, personal and equipment costs). The budget cost for the upcoming period is $500,000. Activity analysis, recently conducted when the ABC system was implemented, revealed the following information: Based on the proceeding information, calculate the activity-cost driver (ABC) rates for each of the three activities performed by the customer service department. Assume that during the period actual cost-driver activity levels are exactly as planned. Under the situation, what is the total cost assigned to each of the activities? For each activity, what is the cost of unused capacity? Suppose that during the upcoming period, activities (i.e., cost-driver quantities) are exactly as budgeted, 500 customers, too that the practical capacity level for each of these activities is 10,000 customer orders, 200 complaints and 500 credit checks. Using cost-driver rates based on practical capacity levels for each activity and the associated cost of unusual capacity for each activity? What actions might management of Zenon Computer take in response to the analysis conducted in response to (2) above? What nonfinancial performance indicators do you recommend Zenon Computers monitors in terms of its customer service department? In general, how are these indicator chosen? (Thus is, how do you justify the items you are recommending?)Explanation / Answer
1.
The activity cost driver (ABC) rates and the cost of unused capacity:
2.
With the actual practical capacity of the activity cost driver (ABC) rates and the cost of unused capacity:
3. The management of Zenon computer should raise the activity level at the each activity and revise the budget according to the practical capacity required rate cost.
4.The non-financial performance indicators involves:
a. Whether the customers orders are being met on time.
b. Whether any of the customer's complaint has been unaddressed.
c. Whether any of the customers credit checks are not been conducted.
d. Percentage of customer satisfaction exists with the company.
e. Being the repeated jobs, how much learning effect of the employees has reduced activity time and cost.
f. The customer - employee - company relations is being maintained.
The Management has to choose the non- financial performance indicators from the work place only, where the jobs are been performed and work lackness and advantages exists.
Activity Percentage of Manpower Budgeted amount estimated of Total $800,000 Estimated budgeted Cost Driver Quantity (A) Activity cost driver (ABC) Rate Actual cost driver activity(B) Unused Capacity (A-B) Handling Customers Orders 0.75 $600000 8000 $75 8000 0 Processing Customer Complaints 0.10 $66667 400 $167 400 0 Conducting customer credit checks 0.15 $133333 500 $267 500 0Related Questions
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