The costs of the Systems Support (SS) department (and other service departments) of Northwest Wood Products have always been charged to the three business divisions (Forest Resources, Lumber Products, and Paper Products) based on the number of employees in each division. This measure is easy to obtain and update, and until recently none of the divisions has complained about the charges. The Paper Products division has recently automated many of its operations and has reduced its number of employees. At the same time, how- ever, in order to monitor its new process, Paper Products has increased its requests for various reports provided by the SS department. The other divisions have begun to complain that they are being charged more than their fair share of SS department costs. Based on activity analysis of possible cost drivers, cost analysts have suggested using the number of reports prepared as a means of charging for SS costs and have gathered the following information:

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FOREST RESOURCES LUMBER PRODUCTS PAPER PRODUCTS 2006 Number of Employees 762 457 502 2006 Number of Reports 410 445 377 2006 SS Costs: $300,000 2007 Number of Employees 751 413 131 2007 Number of Reports 412 432 712 2007 SS Costs: $385,000