Carol : Gary, I understand you have some questions about the way photocopying is run. Let me assure you that we work very hard to keep costs down while providing top-notch service. Your department was charged only for the copies you made.
Gary : Carol, I took my total cost allocation and divided it by the number of copies. Do you realize that it comes to $0.12 per page? Why is your department so much higher than outside services?
Carol : Gary, you have to realize that we bought machinery for peak usage. In our firm, that’s the month of April when Tax runs most of their copies. Other months are slower, but I can trade in the copier on a month-to-month basis. Also, we need at least one person ready to handle your copies or you’ll ready hit the ceiling. As a result, the per-page charges are higher.
Gary : I think I’m beginning to see what’s happening. Still, I’d like to explore different charging systems.
Jan : If there’s a problem here, it is a firm wide problem. I can assign Cynthia Bowles, our firm’s new intern from State University, to take this on as a special project.
Questions to Think About
1. Why do you think that the photocopying charges amount to $0.12 per page? List the types of costs incurred for photocopying, and divide them into fixed and variable categories.
2. Jan mentioned the security and convenience of in-house photocopying. How do you think the firm might weigh these factors in deciding whether or not the cost of in-house copying is worth it?
3. Since the firm as a whole has decided to have an in-house copying department, why are copying costs charged to the individual departments? What purpose does the practice of developing support-department charging rates serve?
Carol : Gary, I understand you have some questions about the way photocopying is run. Let me assure you that we work very hard to keep costs down while providing top-notch service. Your department was charged only for the copies you made.
Gary : Carol, I took my total cost allocation and divided it by the number of copies. Do you realize that it comes to $0.12 per page? Why is your department so much higher than outside services?
Carol : Gary, you have to realize that we bought machinery for peak usage. In our firm, that’s the month of April when Tax runs most of their copies. Other months are slower, but I can trade in the copier on a month-to-month basis. Also, we need at least one person ready to handle your copies or you’ll ready hit the ceiling. As a result, the per-page charges are higher.
Gary : I think I’m beginning to see what’s happening. Still, I’d like to explore different charging systems.
Jan : If there’s a problem here, it is a firm wide problem. I can assign Cynthia Bowles, our firm’s new intern from State University, to take this on as a special project.
Questions to Think About
1. Why do you think that the photocopying charges amount to $0.12 per page? List the types of costs incurred for photocopying, and divide them into fixed and variable categories.
2. Jan mentioned the security and convenience of in-house photocopying. How do you think the firm might weigh these factors in deciding whether or not the cost of in-house copying is worth it?
3. Since the firm as a whole has decided to have an in-house copying department, why are copying costs charged to the individual departments? What purpose does the practice of developing support-department charging rates serve?
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