A recent directive from Eugenia Yu, CEO of Comtel, had
instructed each department to cut its cost by 10 percent. The traditional budget
for the warehousing department was as follows:

Transcribed Image Text:

Salaries, 4 employees @ $42,000 $168,000 Benefits 20% 33,600 Amortization, straight-line basis Parts and supplies 76,000 42,400 Overhead 35% of direct costs 112,000 Total $432,000 Therefore, the warehousing division needed to find $43,200 to cut. Athan Viris, a recent MBA graduate, was asked to pare $43,200 from the warehousing department's budget. As a first step, he recast the traditional bud- get into an activity-based budget: Receiving, 620,000 kilograms Shipping, 402,000 boxes Handling, 11,200 moves Record-keeping, 65,000 transactions Total $ 93,000 201,000 112,000 26,000 $432,000 1. What actions might Viris suggest to attain a $43,200 budget cut? Why would these be the best actions to pursue? 2. Which budget helped you most in answering requirement 1? Explain.