10. Process Activity Analysis The procurement process for Omni Wholesale Company includes a series of activities that transforms a materials requisition into a vendor check. The process begins with a request for materials. The requesting department prepares and sends a materials request form to the Purchasing Department. The Purchasing Department then places a request for a quote to vendors. Vendors prepare bids in response to the request for a quote. A vendor is selected based on the lowest bid. A purchase order to the low-bid vendor is prepared. The vendor delivers the materials to the company, whereupon a receiving ticket is prepared. Payment to the vendor is authorized if the materials request form, receiving ticket, and vendor invoice are in agreement. These three documents fail to agree 50% of the time, initiating effort to reconcile the differences. Once the three documents agree, a check is issued. The process can be diagrammed as follows: An activity analysis indicated the following activity costs with this process: Preparing materials request $17,600 Requesting, receiving, and selecting vendor bids 59,400 Preparing purchase order 11,000 Preparing receiving ticket 15,400 Matching M/R, R/T, and invoice 22,000 Correcting reconciliation differences 70,400 Preparing and delivering vendor payment 24,200 Total process activity cost $220,000 On average, the process handles 20,000 individual requests for materials that result in 20,000 individual payments to vendors. Management proposes to improve this process in two ways. First, the Purchasing Department will develop a preapproved vendor list for which orders can be placed without a request for quote. It is expected that this will reduce the cost of requesting and receiving vendor bids by 65%. Second, additional training and standardization will be provided to reduce errors introduced into the materials requisition form and receiving tickets. It is expected that this will reduce the number of reconciliation differences from 50% to 30%, over an average of 20,000 payments. a. Develop a table showing the percent of individual activity cost to the total process cost. Round percentages to the nearest whole number, if required. Omni Wholesale Company Individual activity cost to the total process cost Procurement Activities Activity Cost Percent of Total Process Cost Preparing materials request $fill in the blank d8bef1fd6fb8013_1 fill in the blank d8bef1fd6fb8013_2% Requesting, receiving, and selecting vendor bids fill in the blank d8bef1fd6fb8013_3 fill in the blank d8bef1fd6fb8013_4% Preparing purchase order fill in the blank d8bef1fd6fb8013_5 fill in the blank d8bef1fd6fb8013_6% Preparing receiving ticket fill in the blank d8bef1fd6fb8013_7 fill in the blank d8bef1fd6fb8013_8% Matching M/R, R/T, and invoice fill in the blank d8bef1fd6fb8013_9 fill in the blank d8bef1fd6fb8013_10% Correcting reconciliation differences fill in the blank d8bef1fd6fb8013_11 fill in the blank d8bef1fd6fb8013_12% Preparing and delivering vendor payment fill in the blank d8bef1fd6fb8013_13 fill in the blank d8bef1fd6fb8013_14% Total process activity cost $fill in the blank d8bef1fd6fb8013_15 fill in the blank d8bef1fd6fb8013_16% b. Determine the average total process cost per vendor payment, assuming 20,000 payments. Round to the nearest cent, if required. $fill in the blank a42da7fe407a060_1 per vendor payment c. Prepare a table showing the improvements in the activity costs as a result of the changes proposed by management. If an amount is zero, enter a "0". Omni Wholesale Company Changes activity costs Procurement Activities Activity Cost Prior to Improvement Activity Cost After Improvement Activity Cost Savings Preparing materials request $fill in the blank 73530103af97fa3_1 $fill in the blank 73530103af97fa3_2 $fill in the blank 73530103af97fa3_3 Requesting, receiving, and selecting vendor bids fill in the blank 73530103af97fa3_4 fill in the blank 73530103af97fa3_5 fill in the blank 73530103af97fa3_6 Preparing purchase order fill in the blank 73530103af97fa3_7 fill in the blank 73530103af97fa3_8 fill in the blank 73530103af97fa3_9 Preparing receiving ticket fill in the blank 73530103af97fa3_10 fill in the blank 73530103af97fa3_11 fill in the blank 73530103af97fa3_12 Matching M/R, R/T, and invoice fill in the blank 73530103af97fa3_13 fill in the blank 73530103af97fa3_14 fill in the blank 73530103af97fa3_15 Correcting reconciliation differences fill in the blank 73530103af97fa3_16 fill in the blank 73530103af97fa3_17 fill in the blank 73530103af97fa3_18 Preparing and delivering vendor payment fill in the blank 73530103af97fa3_19 fill in the blank 73530103af97fa3_20 fill in the blank 73530103af97fa3_21 Total process activity cost $fill in the blank 73530103af97fa3_22 $fill in the blank 73530103af97fa3_23 $fill in the blank 73530103af97fa3_24

10. Process Activity Analysis The procurement process for Omni Wholesale Company includes a series of activities that transforms a materials requisition into a vendor check. The process begins with a request for materials. The requesting department prepares and sends a materials request form to the Purchasing Department. The Purchasing Department then places a request for a quote to vendors. Vendors prepare bids in response to the request for a quote. A vendor is selected based on the lowest bid. A purchase order to the low-bid vendor is prepared. The vendor delivers the materials to the company, whereupon a receiving ticket is prepared. Payment to the vendor is authorized if the materials request form, receiving ticket, and vendor invoice are in agreement. These three documents fail to agree 50% of the time, initiating effort to reconcile the differences. Once the three documents agree, a check is issued. The process can be diagrammed as follows: An activity analysis indicated the following activity costs with this process: Preparing materials request $17,600 Requesting, receiving, and selecting vendor bids 59,400 Preparing purchase order 11,000 Preparing receiving ticket 15,400 Matching M/R, R/T, and invoice 22,000 Correcting reconciliation differences 70,400 Preparing and delivering vendor payment 24,200 Total process activity cost $220,000 On average, the process handles 20,000 individual requests for materials that result in 20,000 individual payments to vendors. Management proposes to improve this process in two ways. First, the Purchasing Department will develop a preapproved vendor list for which orders can be placed without a request for quote. It is expected that this will reduce the cost of requesting and receiving vendor bids by 65%. Second, additional training and standardization will be provided to reduce errors introduced into the materials requisition form and receiving tickets. It is expected that this will reduce the number of reconciliation differences from 50% to 30%, over an average of 20,000 payments. a. Develop a table showing the percent of individual activity cost to the total process cost. Round percentages to the nearest whole number, if required. Omni Wholesale Company Individual activity cost to the total process cost Procurement Activities Activity Cost Percent of Total Process Cost Preparing materials request $fill in the blank d8bef1fd6fb8013_1 fill in the blank d8bef1fd6fb8013_2% Requesting, receiving, and selecting vendor bids fill in the blank d8bef1fd6fb8013_3 fill in the blank d8bef1fd6fb8013_4% Preparing purchase order fill in the blank d8bef1fd6fb8013_5 fill in the blank d8bef1fd6fb8013_6% Preparing receiving ticket fill in the blank d8bef1fd6fb8013_7 fill in the blank d8bef1fd6fb8013_8% Matching M/R, R/T, and invoice fill in the blank d8bef1fd6fb8013_9 fill in the blank d8bef1fd6fb8013_10% Correcting reconciliation differences fill in the blank d8bef1fd6fb8013_11 fill in the blank d8bef1fd6fb8013_12% Preparing and delivering vendor payment fill in the blank d8bef1fd6fb8013_13 fill in the blank d8bef1fd6fb8013_14% Total process activity cost $fill in the blank d8bef1fd6fb8013_15 fill in the blank d8bef1fd6fb8013_16% b. Determine the average total process cost per vendor payment, assuming 20,000 payments. Round to the nearest cent, if required. $fill in the blank a42da7fe407a060_1 per vendor payment c. Prepare a table showing the improvements in the activity costs as a result of the changes proposed by management. If an amount is zero, enter a "0". Omni Wholesale Company Changes activity costs Procurement Activities Activity Cost Prior to Improvement Activity Cost After Improvement Activity Cost Savings Preparing materials request $fill in the blank 73530103af97fa3_1 $fill in the blank 73530103af97fa3_2 $fill in the blank 73530103af97fa3_3 Requesting, receiving, and selecting vendor bids fill in the blank 73530103af97fa3_4 fill in the blank 73530103af97fa3_5 fill in the blank 73530103af97fa3_6 Preparing purchase order fill in the blank 73530103af97fa3_7 fill in the blank 73530103af97fa3_8 fill in the blank 73530103af97fa3_9 Preparing receiving ticket fill in the blank 73530103af97fa3_10 fill in the blank 73530103af97fa3_11 fill in the blank 73530103af97fa3_12 Matching M/R, R/T, and invoice fill in the blank 73530103af97fa3_13 fill in the blank 73530103af97fa3_14 fill in the blank 73530103af97fa3_15 Correcting reconciliation differences fill in the blank 73530103af97fa3_16 fill in the blank 73530103af97fa3_17 fill in the blank 73530103af97fa3_18 Preparing and delivering vendor payment fill in the blank 73530103af97fa3_19 fill in the blank 73530103af97fa3_20 fill in the blank 73530103af97fa3_21 Total process activity cost $fill in the blank 73530103af97fa3_22 $fill in the blank 73530103af97fa3_23 $fill in the blank 73530103af97fa3_24

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

10.

Process Activity Analysis

The procurement process for Omni Wholesale Company includes a series of activities that transforms a materials requisition into a vendor check. The process begins with a request for materials. The requesting department prepares and sends a materials request form to the Purchasing Department. The Purchasing Department then places a request for a quote to vendors. Vendors prepare bids in response to the request for a quote. A vendor is selected based on the lowest bid. A purchase order to the low-bid vendor is prepared. The vendor delivers the materials to the company, whereupon a receiving ticket is prepared. Payment to the vendor is authorized if the materials request form, receiving ticket, and vendor invoice are in agreement. These three documents fail to agree 50% of the time, initiating effort to reconcile the differences. Once the three documents agree, a check is issued. The process can be diagrammed as follows:

An activity analysis indicated the following activity costs with this process:

Preparing materials request	$17,600
Requesting, receiving, and selecting vendor bids	59,400
Preparing purchase order	11,000
Preparing receiving ticket	15,400
Matching M/R, R/T, and invoice	22,000
Correcting reconciliation differences	70,400
Preparing and delivering vendor payment	24,200
Total process activity cost	$220,000

On average, the process handles 20,000 individual requests for materials that result in 20,000 individual payments to vendors.

Management proposes to improve this process in two ways. First, the Purchasing Department will develop a preapproved vendor list for which orders can be placed without a request for quote. It is expected that this will reduce the cost of requesting and receiving vendor bids by 65%. Second, additional training and standardization will be provided to reduce errors introduced into the materials requisition form and receiving tickets. It is expected that this will reduce the number of reconciliation differences from 50% to 30%, over an average of 20,000 payments.

a. Develop a table showing the percent of individual activity cost to the total process cost. Round percentages to the nearest whole number, if required.

Omni Wholesale Company
Individual activity cost to the total process cost

Procurement Activities	Activity Cost	Percent of Total Process Cost
Preparing materials request	$fill in the blank d8bef1fd6fb8013_1	fill in the blank d8bef1fd6fb8013_2%
Requesting, receiving, and selecting vendor bids	fill in the blank d8bef1fd6fb8013_3	fill in the blank d8bef1fd6fb8013_4%
Preparing purchase order	fill in the blank d8bef1fd6fb8013_5	fill in the blank d8bef1fd6fb8013_6%
Preparing receiving ticket	fill in the blank d8bef1fd6fb8013_7	fill in the blank d8bef1fd6fb8013_8%
Matching M/R, R/T, and invoice	fill in the blank d8bef1fd6fb8013_9	fill in the blank d8bef1fd6fb8013_10%
Correcting reconciliation differences	fill in the blank d8bef1fd6fb8013_11	fill in the blank d8bef1fd6fb8013_12%
Preparing and delivering vendor payment	fill in the blank d8bef1fd6fb8013_13	fill in the blank d8bef1fd6fb8013_14%
Total process activity cost	$fill in the blank d8bef1fd6fb8013_15	fill in the blank d8bef1fd6fb8013_16%

b. Determine the average total process cost per vendor payment, assuming 20,000 payments. Round to the nearest cent, if required.
$fill in the blank a42da7fe407a060_1 per vendor payment

c. Prepare a table showing the improvements in the activity costs as a result of the changes proposed by management. If an amount is zero, enter a "0".

Omni Wholesale Company
Changes activity costs

Procurement Activities	Activity Cost Prior to Improvement	Activity Cost After Improvement	Activity Cost Savings
Preparing materials request	$fill in the blank 73530103af97fa3_1	$fill in the blank 73530103af97fa3_2	$fill in the blank 73530103af97fa3_3
Requesting, receiving, and selecting vendor bids	fill in the blank 73530103af97fa3_4	fill in the blank 73530103af97fa3_5	fill in the blank 73530103af97fa3_6
Preparing purchase order	fill in the blank 73530103af97fa3_7	fill in the blank 73530103af97fa3_8	fill in the blank 73530103af97fa3_9
Preparing receiving ticket	fill in the blank 73530103af97fa3_10	fill in the blank 73530103af97fa3_11	fill in the blank 73530103af97fa3_12
Matching M/R, R/T, and invoice	fill in the blank 73530103af97fa3_13	fill in the blank 73530103af97fa3_14	fill in the blank 73530103af97fa3_15
Correcting reconciliation differences	fill in the blank 73530103af97fa3_16	fill in the blank 73530103af97fa3_17	fill in the blank 73530103af97fa3_18
Preparing and delivering vendor payment	fill in the blank 73530103af97fa3_19	fill in the blank 73530103af97fa3_20	fill in the blank 73530103af97fa3_21
Total process activity cost	$fill in the blank 73530103af97fa3_22	$fill in the blank 73530103af97fa3_23	$fill in the blank 73530103af97fa3_24

d. Estimate the average cost per vendor payment, assuming that the changes proposed by management are enacted for 20,000 total payments. Round to the nearest cent.
$fill in the blank 9e45af080fd4061_1 per vendor payment

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