Design of Strategic Business Unit MetroBank is a fast-growing bank that serves theregion around Jacksonville, Florida. The bank provides commercial and individual banking services, including investment and mortgage banking services. The firm’s strategy is to continueto grow by acquiring smaller banks in the area to broaden the base and variety of services it canoffer. The bank now has 87 strategic business units, which represent different areas of servicein different locations. To support its growth, MetroBank has invested several million dollarsin upgrading its information services function. The number of networked computers and ofsupport personnel has more than doubled in the last 4 years and now accounts for 13% of totaloperating expenses. Two years ago, MetroBank decided to charge information services to theSBUs based on the head count (number of employees) in each SBU. Recently, some of thelarger SBUs have complained that this method overcharges them and that some of the smallerSBUs are actually using a larger share of the total information services resources. MetroBank’scontroller has decided to investigate these complaints. His inquiry of the director of the information services department revealed that the larger departments generally use more services,but some small departments in fact kept him pretty busy. Based on this response, the controlleris considering changing the charges for information services to the basis of actual service callsin each SBU rather than the head count.Required Is the information services department at MetroBank a profit center or a cost center? Whichtype of unit should it be, and why? Also, evaluate the controller’s decision regarding the basis for charginginformation services costs to the SBUs.
Design of Strategic Business Unit MetroBank is a fast-growing bank that serves the
region around Jacksonville, Florida. The bank provides commercial and individual banking services, including investment and mortgage banking services. The firm’s strategy is to continue
to grow by acquiring smaller banks in the area to broaden the base and variety of services it can
offer. The bank now has 87 strategic business units, which represent different areas of service
in different locations. To support its growth, MetroBank has invested several million dollars
in upgrading its information services function. The number of networked computers and of
support personnel has more than doubled in the last 4 years and now accounts for 13% of total
operating expenses. Two years ago, MetroBank decided to charge information services to the
SBUs based on the head count (number of employees) in each SBU. Recently, some of the
larger SBUs have complained that this method overcharges them and that some of the smaller
SBUs are actually using a larger share of the total information services resources. MetroBank’s
controller has decided to investigate these complaints. His inquiry of the director of the information services department revealed that the larger departments generally use more services,
but some small departments in fact kept him pretty busy. Based on this response, the controller
is considering changing the charges for information services to the basis of actual service calls
in each SBU rather than the head count.
Required Is the information services department at MetroBank a profit center or a cost center? Which
type of unit should it be, and why? Also, evaluate the controller’s decision regarding the basis for charging
information services costs to the SBUs.
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