The Customer Service Department of Grand Lakes Technologies asked the Publicatio

Question

The Customer Service Department of Grand Lakes Technologies asked the Publications Department to prepare a brochure for its training program. The Publications Department delivered the brochure and charged the Customer Service Department a rate that was 25% higher than could be obtained from an outside printing company. The policy of the company required the Customer Service Department to use the internal publications group for brochures. The Publications Department claimed that it had a drop in demand for its services during the fiscal year, so it had to charge higher prices in order to recover its payroll and fixed costs. 1. Should the cost to the brochure be transferred to the Customer Service Department in order to hold the department head accountable for the cost of the brochure? 2. What changes in policy would you recommend?

Explanation / Answer

1. Yes, the cost to the brochure should be transferred to the customer service department as customer service department is liable for all the expenditure incurred for the training program under the customer service department

2. I Would recommend that the company should withdraw its policy of using the internal publications group for brochures as the Publication Department is charging 25% price higher than the market price

Practically, The income of the one the department is moving towards the another department, but by using the internal source one department has to pay 25% more income to the other department which will lead to loss of one department

If the department uses outside source, then it could have saved the 25% and will not make any loss to the department

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