Using cost accounting data The typing pool of Slyder University's Economics Depart- ment employs four secretaries. They type correspondence, examinations, and research manuscripts; take dictation; distribute the mail; operate duplicating equipment; and perform miscellaneous services for faculty members. The workload has been excessive during the past semester, resulting in long waiting times for low-priority work such as textbook manuscripts. The chairperson would like to request an addition to the budget for another secretary but is not sure the request would be approved, especially since this would also entail buying another typewriter for $1,000.

Since Slyder University is located in a "university" town and other employment opportuni- ties are limited, salaries are low. The chairperson, limited by her budget, cannot pay the secretaries more than $700 salary per month.

In order to justify the budget request the chairperson decides to conduct a study of typing pool productivity. Data are collected over a six-week period and yield the following:

1. Seventy-five percent of the secretaries' actual working time is devoted to typing and the other 25 percent to other duties such as dictation, duplicating, and mail processing.

2. On the average, each secretary produces 3,750 lines of typing per month.

3. A 33 1 /3 percent increase in typing output would be sufficient to satisfy current departmental demands. This could be provided by one new secretary whose duties would be devoted entirely to typing, but it would leave no excess capacity.

4. The nontyping work of the secretaries is performed efficiently and is not expected to change in volume.

During a faculty meeting, the chairperson announces that one of the typing pool secretaries has resigned as of the end of the semester because he established a charter fishing service. Since this salary is already part of the departmental budget, a new secretary can be hired. But the chairperson expresses doubts about getting budget approval for another position and typewriter and asks the faculty for suggestions.

One of the faculty members suggests not replacing the secretary who is leaving. Instead, he says the department should obtain top-of-the-line desktop computers for two of the remaining three secretaries. The equipment costs $26,000 but can be leased at $1,150 per month on a four-year lease, at the end of which the department would own the equipment. By leasing the equipment, the chairperson would have to request only $450 per month increase in the budget. The computer dealer representative claims that it is possible to increase productivity fivefold, but a more realistic estimate is a threefold increase in typing capacity for the two secretaries who would be using the equipment. This increase is possible because material once typed with the equipment does not have to be retyped, as it is stored either on internal hard disks or 3V2 inch disks.

The faculty member continues "Everybody knows that typewriters are a thing of the past, they are dinosaurs. With a computer, errors are corrected and changes are made so easily that we should not even consider typewriters. Besides, when they are not being used for word-processing we can use them to run regressions and conduct other research-related work."

The chairperson is inclined to agree with the faculty member but she is limited by her budget. In addition, she is not convinced that three secretaries could handle the entire workload even with a threefold improvement in typing productivity. However, she thinks that the additional budget amount has a high probability of being approved by the administration but she does not want to say it aloud for fear that it may not come true. The chairperson also believes that if waiting time for manuscripts is reduced, faculty members would become more productive researchers.

REQUIRED

a. Determine the salary cost of typing one line of material with the current arrangement.

b. Determine the typing capacity of the typing pool with three secretaries, two of whom use computers, assuming the nontyping workload does not change.

c. Calculate the cost of typing one line of material using the two computers plus one typewriter based on the salaries of three secretaries and the lease payments on the equipment.

d. Recommend to the chairperson whether to increase the typing pool to five secretaries or acquire the computers.

e. In addition to the quantitative measures used above, what qualitative dimensions should be considered?