Black Furniture Inc. maintains an Accounts Receivable Department that currently
ID: 2356434 • Letter: B
Question
Black Furniture Inc. maintains an Accounts Receivable Department that currently employs 8 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 activates handled by the department are (1) billing and recording payments, (2) customer service activates, (3) financial reporting and analysis, and (4) collecting delinquent accounts...... The salaries paid to the departments employees are as follows:........ Manager, 1 @ $60,000 per year = $60,000....... Clerks, 5 @ $30,000 per year = 150,000....... Accounts specialists, 2 @ $40,000 per year = 80,000....... Total = $290,000......... It is estimated that the manager of the Accounts Receivable Departments spends an equal amount of her 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 and activities and customer service activities that the clerks are not qualified to perform............ Pay pro, Inc. has proposed that it can perform all the activates related to collecting delinquent accounts for a fee of $50,000 per year. The manager of Pay pro argues that Blake can save $30,000 because the $80,000 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 Pay pro 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 Accounts Receivable Department.... b. Should Blake accept Pay pros offer to take over its delinquent account activities? .......Explanation / Answer
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