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Chapter 19 Costing and the Value Chain Blake Furniture, Inc., maintains an Accounts Receivable Department 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 Accounts Receivable Department. The four main activities handled by the department are (1) billing and recording payments, (2) customer service activities, (3) financial reporting and analysis, and (4) collecting delinquent accounte The salaries paid to the department's employees are as follows. CISE 19.4 y-Based Management

Chapter 19 Costing and the Value Chain Blake Furniture, Inc., maintains an Accounts Receivable Department 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 Accounts Receivable Department. The four main activities handled by the department are (1) billing and recording payments, (2) customer service activities, (3) financial reporting and analysis, and (4) collecting delinquent accounte The salaries paid to the department's employees are as follows. CISE 19.4 y-Based Management

FINANCIAL ACCOUNTING
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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19.4
# Chapter 19: Costing and the Value Chain Blake Furniture, Inc. maintains an Accounts Receivable Department that currently employs eight people. Blake is interested in conducting an activity analysis because an outside firm has offered to take over a portion of the activities currently handled by the Accounts Receivable Department. The four main activities handled by the department are: 1. Billing and recording payments 2. Customer service activities 3. Financial reporting and analysis 4. Collecting delinquent accounts. ### Salaries Paid to the Department’s Employees: - Manager: 1 @ $65,000 per year = $65,000 - Clerks: 5 @ $30,000 per year = $150,000 - Account Specialists: 2 @ $38,000 per year = $76,000 **Total Salaries: $291,000** It is estimated that the manager of the Accounts Receivable Department spends an equal amount of time supervising the four main activities. The clerks spend approximately half of their time on billing and recording payments. Their remaining time is divided equally between reporting activities and customer service. The two account specialists spend half of their time on delinquent account activities, and the rest of their time is split equally between financial analysis activities and customer service activities that the clerks are not qualified to perform. Paypro, Inc., has proposed that it can perform all the activities related to collecting delinquent accounts for a fee of $50,000 per year. The manager of Paypro argues that Blake can save $26,000 because the $76,000 in salaries paid to the specialists who currently handle all delinquent accounts can be eliminated. If the contract is accepted, it is estimated that the manager of the Accounts Receivable Department would need to devote a quarter of her time to dealing with Paypro employees. ### Questions: a. Using the information given, prepare an activity table such as that in Exhibit 19-3 to calculate the labor cost for personnel devoted to each of the four main activities of the Accounts Receivable Department. b. Should Blake accept Paypro’s offer to take over its delinquent account activities?
Transcribed Image Text:# Chapter 19: Costing and the Value Chain Blake Furniture, Inc. maintains an Accounts Receivable Department that currently employs eight people. Blake is interested in conducting an activity analysis because an outside firm has offered to take over a portion of the activities currently handled by the Accounts Receivable Department. The four main activities handled by the department are: 1. Billing and recording payments 2. Customer service activities 3. Financial reporting and analysis 4. Collecting delinquent accounts. ### Salaries Paid to the Department’s Employees: - Manager: 1 @ $65,000 per year = $65,000 - Clerks: 5 @ $30,000 per year = $150,000 - Account Specialists: 2 @ $38,000 per year = $76,000 **Total Salaries: $291,000** It is estimated that the manager of the Accounts Receivable Department spends an equal amount of time supervising the four main activities. The clerks spend approximately half of their time on billing and recording payments. Their remaining time is divided equally between reporting activities and customer service. The two account specialists spend half of their time on delinquent account activities, and the rest of their time is split equally between financial analysis activities and customer service activities that the clerks are not qualified to perform. Paypro, Inc., has proposed that it can perform all the activities related to collecting delinquent accounts for a fee of $50,000 per year. The manager of Paypro argues that Blake can save $26,000 because the $76,000 in salaries paid to the specialists who currently handle all delinquent accounts can be eliminated. If the contract is accepted, it is estimated that the manager of the Accounts Receivable Department would need to devote a quarter of her time to dealing with Paypro employees. ### Questions: a. Using the information given, prepare an activity table such as that in Exhibit 19-3 to calculate the labor cost for personnel devoted to each of the four main activities of the Accounts Receivable Department. b. Should Blake accept Paypro’s offer to take over its delinquent account activities?
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