Costs for Decision Making: An Instructional Case of Relevant Costs and Differential Analysis of Cost Reduction Alternatives[A1][A2]

[A3]

INTRODUCTION

This case is based on a real-life project and takes place in 2010 at the New York City headquarters for the United States operations of AC Global, Inc. (The real name has been changed.)AC Global is a multinational insurance company with its headquarters in France and annual revenue rankingin the top ten companies globally.The company has significant operations in the United States, Europe, Japan, and Australia and the operations in each country are separate insurance companies and operate with a large degree of autonomy.Recently, AC Global established insurance operations and a servicing center in India.The servicing center in India primarily provides some information technology (IT) support for the insurance operations in the United Kingdom (U.K.), Belgium, and France.The ongoingglobal recession has significantly decreased the profitability of AC Global, increasing the importance of reducing costs.

A.C. Global's operations in the U.S. (AC-US.) sell life and annuity products and represent approximately 20% of the group'slife and annuity revenues.AC-US has approximately 3,000 employees, with about 1,000 employees based in the New York City headquarters. The remaining employees are located at the company's service centers in N.J., Pa., and N.C.

IMPACT ON SHORT-TERM PROFITS

[A4][A5]For an insurance company, there are four keyline items on the income statement: premium revenue, investment income, benefits/claims expense,and operating expenses. Operating expenses provide the greatest opportunity for short-term improvement in earnings since the other line items are less controllable, or the impacts of changes emerge over a longperiod of time.Investment income is primarily comprised of interest and dividends on bonds and common stock investments and is not changed through operating actions. Premium revenue is comprised of fees collected for providing insurance coverage and is only modestly impacted by current sales.Benefits and claims are paid to policyholders and their beneficiaries and are also difficult to impact in the short-term.

The global economic downturn that began in late 2008 put intense pressure on the financial services industry. During 2009, U.S. sales of annuity productsdecreased by 30% while life insurance sales fell by 15%[i]. Like the industry, AC Global has been negatively impacted by the economic downturn. AC.-U.S. premium revenue fell 8% cumulatively between 2007 and 2009. In 2010, the company's operations remained stable, but revenue was expected to be similar to 2009.

AC. Global's operating earnings decreased over 80% from 2007 to 2008 and AC-US suffered an operating loss in 2008. Although operating earnings recovered somewhat in 2009 (shown in Figure 1), the earnings for AC. Global consolidated and AC-U.S. are still 36% and 40%, respectively, below those in 2007.As a result, the company's stock price is down nearly 50% since the beginning of the crisis in 2008.

AC-US. measures operating efficiency based on the expense ratio, which is operating expenses divided by premium revenue.In 2004, AC-US. went through a restructuring that reduced personnel overlap and inefficiency.Through the restructuring, AC-US. reduced the workforce by 4%, reduced operating expenses by 5% and improved the expense ratio from 12.7% in 2004 to 10.1% by 2007, 14% better than the expense ratio of 11.7%[A6][A7] for AC Global.While operating expenses have grown modestly at 2% since 2007, the expense ratio for AC-US increased from 10.1% in 2007 to over 12.5% in 2009, worse than the 12.1% for AC Global.[A8]AC-US. has underperformed AC. Global in earnings and cost efficiency during 2009, which is concerning for the management of AC-US (see Figure 2).

COST REDUCTION ANALYSIS PROJECT

Peter George is a vice president responsible for financial planning and analysis (FP&A) at AC-US. in New York. In his role, George and his team evaluate all significant projects with financial implications. George led the team that analyzed and recommended the restructuring six years ago that significantly improved the expense ratio.

George met with Brian Thomas,the chief financial officer (CFO). Thomas had reviewed the first quarter preliminary revenue and earnings and told George that it is imperative for the company to find ways to reduce expenses to improve earnings. Heset a goal of a 10% reduction in operating expenses. If AC-US achieved that goal, he estimated that the companywould return the expense ratio to a value below 11% and operating earnings would return to 2007 levels.

Before engaging the rest of the organization, the CFO would like the functions he manages to take a leadership position in the cost reductionsnot just recommending cost reduction actions but also providing examples to show they are effective.Thomasreviewed the accounting function first, and decided he wants it [A9][A10]to reduce expenses by 10% overall, in line with the company's overall target. He also would like to see a payback period of two years or less for any one-time costs.

Thomas asked George to evaluate potential cost saving alternatives and provide him with a preliminary analysis within one week.Thomas then informs George that the company has recently began performing some accounting functions in the service center in India and givesGeorge the contact information for Sanjay Delphi, the project manager for the company's India facility.

George believes that in addition to outsourcing (offshoring), increasing the use of electronic payments in accounts payable and relocating some of accounting functions to the service center in N.J. are two other viable ways to reduce costs. George made notes on information regarding expenses relevant for the analysis, including the severance policy (see Table 7, section F).

George also pulled up the organization chart to list all of the various accounting functions as well as their annual expense budgets (Table 1).George further assembled information on the staff in each of the accounting functions including their salaries, benefits, residence, and possible severance based on the years of service and prepared a summary by function (see Table 6).

George meets with two of his team members, SamanthaCharlestonand Ryan Falkirk, to explain the project.Given the one-week turnaround time for the analysis, George suggests that each of them select one option to analyze over the next four days and then meet to develop their recommendations.George selects offshoring, while Charleston decides to analyze electronic check processing, and Falkirk will analyze relocating accounting functions.

OFFSHORING

George reviews some general information on offshoring[A11][A12] and finds that global offshoring has grown rapidly.He finds that accounting processes such as accounts payable, accounts receivable, sales ledger, general ledger, financial reporting, and bank processing are increasingly offshored.[ii]

George calls Delphi to discuss the services performed at the servicing center in India.Delphi informs George that the service center currently provides some information technology (IT)support for the insurance operations in the United Kingdom (U.K.), Belgium, and France; performs some customer service functions; and also recently added a few accounting functions.Delphi emphasized that the service center is just beginning to add staff with accounting expertise and has minimal knowledge of U.S.generally accepted accounting principles (GAAP) accounting requirements, state regulatory accounting requirements and U.S. tax law (the U.S. Internal Revenue Code).

George determines that the first step in his analysis is to identify which accounting functions would be the best candidates to for offshoring and then analyze the financial and logistical feasibility of doing that. George prepares a matrix to assist him in analyzing which functions would be the most appropriate to offshore (see Table 2). George's matrix takes into account required skill levels, local knowledge (of the U.S. Internal Revenue Code, for example), compliance risk, technological support, and the need for direct management oversightwhich may be difficult due to distance and differences in time zones.He rates the functions on each of the criteria as high, medium, and low.

George concludes that the functions that score low or medium on all of the criteria would be the best candidates for outsourcing.Based George's matrix, he believes that the accounts payable and bank reconciliation functions are the best candidates for initial consideration.

The accounts payable function has a separate manager while the bank reconciliation function reports to the manager of general accounting.The Bank Reconciliation Department prepares 50 reconciliations per month (600 per year) and the Accounts Payable Department processes 50,000 checks per month (600,000 per year).George reviews the annual expense budgets, provided in Table 3.

George sends Delphi an email and requests information on the accounts payable and bank reconciliation service functions.Delphi responds that the charges for outsourced services for accounts payable and bank reconciliation are a base monthly fee of $1,250 for each function ($15,000 per year) plus $0.65 per payment for processing accounts payable and $200 per bank reconciliation.

Delphi also informs George that the U.S.-based operations would need to maintain staff to coordinate the transfer of information.Based on a similar project being undertaken by the company's U.K. operations, Delphi estimates that one staff member within the Accounting Department should be sufficient to support both accounts payable and bank reconciliations.Delphi and George discuss the necessary skills.George believes that retaining the accounts payable manager, who likely has the necessary skills, would be a good solutionand he uses that assumption for his analysis.

The accounts payable manager's annual salary is $75,000.The allocated benefits charge is $18,750, but actual benefits and taxes are $19,488.George estimates that the cost fora personal computer, supplies, travel, and all other expenses (excluding postage) would total $15,500.He assumes that the salary, benefits and other expenses associated with the manager would be allocated 65% to accounts payable and 35% to bank reconciliations based upon the estimated time requirements to support each function.George does not include the allocation of rent, corporate expenses or 50% of IT support in his cost reduction estimate.

Delphi also gives Georgethe data transfer and connectivity specifications[A13][A14] to discuss with the IT Department. Josephine Young, of the IT Department, analyzes the requirements and informs George that they would need to improve connectivity and alter the time of the batch processing for accounts payable.She estimates there would be a one-time cost of $100,000 plus $2,500 per month for improved connectivity.The change in the batch processing time will also cause an increase in personnel costs of $2,500 per month. But there are no additional technology requirements for offshoring bank reconciliations.

AUTOMATING ELECTRONIC PAYMENTS

Charleston performs some background research on electronic payments.She finds that the use of electronic payments has increased substantially as the number of checks used in business-to-business transactions rose. The use of paper checks decreased by 5% from 2006 to 2009.[iii]The estimated savings from using electronic payment instead of paper checks ranged from 20% to 90%.[iv]

Since the accounts payable function issues all of its payments as checks, Charleston believes that there may be significant savings if the company made greater use of electronic payments. Charleston contacts the company's corporate banking representative to inquire about electronic payments alternatives.She finds that the bank charges an average of $0.125 per electronic payment.The bank also provides Charleston with a contact at a company that recently adopted electronic payments (identified as Company XYZ).

As a means to estimate the potential impacts, she contacts Company XYZ's treasurer to discuss how it impacted their staffing needs and costs and is informed that Company XYZ averaged 2 minutes in labor per manual check and only 1.5 minutes for each electronic payment.For recurring payments, Company XYZ experienced an 80% time savings annually.To support her analysis, Charleston requests and receives a report showing the number of the company's checks that are recurring to vendors as well as those to employees and business partners, which are good candidates for electronic payments (see Table 4).

Based on her preliminary analysis, Charleston estimates that the company could process up to 50% of its current payments electronically.Using the results for Company XYZ as a proxy, she estimates that electronic payments would reduce processing time by 25% for each electronic payment.Since recurring payments require minimal work after initial set-up, the potential estimated time savings is 80%.Since 16% of payments are recurring, labor savings would be possible.

Charleston estimates that electronic payment processing would reduce staff, with associated reductions in salaries and benefits, and other associated costs. To estimate the impact on staff, she uses ten employees processing 600,000 checks annually and assumes that 50% of the payments could become electronic[v].To calculate the potential savings in salaries and benefits, she assumes that the staff reductions would involve less experienced staff and represent 15% of total salaries and benefits for accounts payable.She estimates also that there would be savings in personal computer (PC) costs, IT support, and other costs of $1,775 per employee.Additionally, there would be a reduction in postage costs in direct proportion to the reduction of the number of checks.These savings would be partially offset by an additional cost of $0.125 for each electronic payment that replaces a check.Further, she uses the information from Table 6, and estimates that severance costs would represent 15% of the maximum eligible severance for accounts payable.

RELOCATION

Falkirk meets with the head of corporate facilities to discuss the availability of space in the N.J. service center and the possibility of subleasing any excess space created in the New Yorkoffice.The head of facilities states that the company currently has over 4,000 square feet of excess space in N.J. and there is up to an additional 28,500 square feet of space available in the building that could be leased for approximately $25 per square foot.But space must be leased in blocks of 9,500 square feet, which is equivalent to one floor in the building.

Also, the head of facilitiesstates that the company currently has approximately 3,500 square feet of excess space in the New York office and could sublease the space in blocks of 10,000 square feet (equivalent to one floor).But if a block or blocks of 10,000 square feet of space cannot be created, the available space could not be subleased.Given current real estate prices, he estimated the sublease rent would be $65 per square foot.Based on past moves, he estimates the costs to move employees and set up new workstations average $1,000 per position in the new space plus $50,000 per floor to buildout and wire the new space.

Falkirk prepares a grid (see Table 5) highlighting the level of management and interdepartment interaction as well as the number of N.J. resident employees in each function.He believes that those functions with the lowest level of interdepartment and management interaction would be best for possible relocation and selects the departments with low to medium interdepartment rankings.Additionally, Falkirkprepares a summary list of employees by function and their residence (see Table 6) to estimate the likely number of employees that would be retained and the potential severance costs if a portion of the accounting functions are relocated to N.J.

He assumes that department heads and their assistants would have offices in both the corporate headquarters and the N.J. location.He estimates that 250 square feet of office space per position will be needed for each employee relocated from the New York office and a comparable[A15][A16] amount would be available for subleasing.He assumes 100% of all employees who are N.J. residents would be retained.Of the residents not in N.J., he assumes all department heads and their assistants would remain while all other employees not from N.J. would terminate and severance would be paid to any employee not relocating.I have provided information regarding the company's severance policy in Table 7, section F, and summary employee information by department in Table 6.

INTERACTION OF ALTERNATIVES

If the company only outsources bank reconciliations, the team has assumed that the bank reconciliation department will need to retain the most experienced employee to support the process.The most experienced employee in the department has eight years of service, a salary of $48,000, health insurance costs of $10,000, 401(k) contributions at 5% and payroll taxes of 7.65%.In addition to the savings in salaries and benefits for the positions eliminated in bank reconciliations, it is also estimated that there would be a savings of $8,000 in total for expenses other than salaries and benefits.The one time initial costs would consist of severance costs for the positions eliminated.

CASE QUESTIONS

Provide responses, displaying all work, to the following questions:

1. What costs are relevant to each of the three alternatives: offshoring, relocating functions, and automating functions?

2. Based on George's assumptions that all of the remaining supervisor's costs are split 65% to accounts payable and 35% to bank reconciliation, and all incremental ongoing technology costs and postage costs are charged to accounts payable, calculate the annual savings per function through offshoring.

3. Using the information that Charleston gathered on electronic payment processing, determine the potential staff reduction and calculate the potential annual cost savings from electronic processing of 50% of the accounts payable checks.

Figure 1: Operating Earnings

Figure[A17][A18] 2: Operating Expense Ratio for AC Global vs. AC.-US

Table 1: Accounting Department Expense Budget Summary

Function

Number of Employees

Annual Salaries

Annual Benefits Load

All Other

Total Budgeted Expenses

Federal tax preparation

8

$802,000

$200,500

$176,500

$1,179,000

State tax preparation

12

812,000

203,000

170,000

1,185,000

Tax management

2

250,000

62,500

72,500

385,000

Controller

2

285,000

71,250

68,750

425,000

SECreporting

7

525,000

131,250

158,750

815,000

U.S. GAAP reporting[A19][A20]

7

575,000

143,750

126,250

845,000

Regulatory financial reporting

6

525,000

131,250

118,750

775,000

Management reporting

6

455,000

113,750

106,250

675,000

Cost accounting

6

385,000

96,250

98,750

580,000

General accounting

10

628,000

157,000

100,000

885,000

Accounts payable

10

470,000

117,500

393,750

981,250

Bank reconciliations

5

215,000

53,750

61,750

330,500

Planning andbudgeting

4

325,000

81,250

88,750

495,000

Financial analysis

8

685,000

171,250

108,750

965,000

Totals

93

$6,937,000

$1,734,250

$1,849,500

$10,520,750

Table 2: Matrix of Potential Accounting Functions for Outsourcing

Function

Skill Level Required

Local Knowledge Required

Mgmt. Support/ Interaction

Technology Support Required

Compliance Risk

Tax Department

Federal tax preparation

Medium

High

Low

Low

High

State tax preparation

Medium

High

Low

Low

High

Tax planning

High

High

High

Low

Medium

Controller's Department

SECreporting

High

High

Medium

Medium

High

U.S. GAAP reporting

High

High

Medium

Medium

High

Regulatory reporting

Medium

High

Medium

Medium

High

Management reporting

Medium

Medium

High

Medium

Low

Cost accounting

Medium

Low

Medium

Medium

Medium

General accounting

Medium

Medium

Medium

Medium

Medium

Accounts payable

Low

Low

Low

Medium

Low

Bank reconciliations

Low

Low

Low

Low

Low

Financial Planning and Analysis

Planning andbudgeting

Medium

Medium

High

Medium

Low

Financial analysis

Medium

Medium

High

Low

Low

Table 3:2010 Detailed Expense Budget for Accounts Payable and Bank Reconciliations

Expense

Accounts Payable

Bank Reconciliations

Salaries

$470,000

$215,000

Benefits load

117,500

53,750

Rent andrelated

64,000

42,000

Supplies

16,750

1,750

PCs

12,000

6,000

IT support

11,500

6,000

Postage

270,000

--

Travel and entertainment

11,500

3,000

Corporate expenses

8,000

3,000

Total

$981,250

$330,500

Table 4: Summary of Checks Processed per Month

Recurring

Business Partners/ Employees

(probably electronic)

All Others

Total

Checks (monthly)

8,000

17,000

25,000

50,000

Percentage

16%

34%

50%

100%

Table 5: Matrix for Evaluating Relocation Prospects

Function

Number of Employees

Mange-ment Interaction

Inter-department Interaction

Em-ployee(s) in N.J.

Tax Department

Federal tax preparation

8

Low

Low

4

State tax preparation

12

Low

Low

9

Tax planning and management

2

High

Medium

0

Controller's Department

Controller

2

High

High

1

SEC reporting

7

Medium

Low

5

U.S. GAAP reporting

7

Medium

Low

5

Regulatory financial reporting[A21][A22]

6

Medium

Low

4

Management reporting

6

Medium

High

4

Cost accounting

6

Medium

Low

5

General accounting

10

Medium

Low

9

Accounts payable

10

Low

Medium

7

Bank reconciliations

5

Low

Low

3

Financial Planning and Analysis

Planning andbudgeting

4

Medium

High

2

Financial analysis

8

High

High

6

93

64

Table[A23][A24] 6: Summary Employee Information for Severance Calculations

Weeks of

Total

ActualCosts

Number of

Eligible

Annual

Benefits

Payroll

Tax Department:

Employees

Severance

Salaries

Load

Health

401 (k)

Taxes

Departmentheadand assistant[A25][A26]

2

32

$250,000

$62,500

$17,200

$12,500

$19,125

FederalTax

N.J. residents

4

76

445,000

111,250

32,200

22,250

34,043

NonN.J. residents

4

66

357,000

89,250

27,200

17,850

27,311

Total

8

142

802,000

200,500

59,400

40,100

61,354

State Taxes

N.J. residents

9

140

627,000

156,750

76,600

31,350

47,966

NonN.J. residents

3

52

185,000

46,250

20,000

9,250

14,153

Total

12

192

812,000

203,000

96,600

40,600

62,119

Controller's Department:

Department head and assistant

2

28

285,000

71,250

15,000

14,250

21,803

SEC Reporting

N.J. residents

5

96

379,000

94,750

34,400

18,950

28,994

NonN.J. residents

2

36

146,000

36,500

17,200

7,300

11,169

Total

7

132

525,000

131,250

51,600

26,250

40,163

U.S. GAAP Reporting

N.J. residents

5

74

413,500

103,375

37,200

20,675

31,633

NonN.J. residents

2

30

161,500

40,375

12,200

8,075

12,355

Total

7

104

575,000

143,750

49,400

28,750

43,988

Regulatory Reporting

N.J. residents

4

52

351,000

87,750

27,200

17,550

26,852

NonN.J. residents

2

30

174,000

43,500

17,200

8,700

13,311

Total

6

82

525,000

131,250

44,400

26,250

40,163

Management Reporting

N.J. residents

4

52

303,000

75,750

27,200

15,150

23,180

NonN.J. residents

2

30

152,000

38,000

17,200

7,600

11,628

Total

6

82

455,000

113,750

44,400

22,750

34,808

Cost Accounting

N.J. residents

5

70

322,000

80,500

34,400

16,100

24,633

NonN.J. residents

1

12

63,000

15,750

10,000

3,150

4,820

Total

6

82

385,000

96,250

44,400

19,250

29,453

General Accounting

N.J. residents

9

128

559,000

139,750

69,400

27,950

42,764

NonN.J. residents

1

18

69,000

17,250

7,200

3,450

5,279

Total

10

146

628,000

157,000

76,600

31,400

48,042

Table 6: Summary Employee Data (continued)[A27]

Weeks of

Total

Actual Costs

Number of

Eligible

Annual

Benefits

Payroll

Employees

Severance

Salaries

Load

Health

401 (k)

Taxes

Accounts Payable

N.J. residents

7

106

333,000

83,250

46,600

16,650

25,475

NonN.J. residents

3

60

137,000

34,250

25,000

6,850

10,481

Total(a)

10

166

470,000

117,500

71,600

23,500

35,956

Bank Reconciliation

N.J. residents

3

42

137,000

34,250

30,000

6,850

10,481

NonN.J. residents

2

24

78,000

19,500

12,200

3,900

5,967

Total^a

5

66

215,000

53,750

42,200

10,750

16,448

Financial Reporting & Analysis Department

Budgeting

N.J. residents

2

28

177,000

44,250

12,200

8,850

13,541

NonN.J. residents

2

26

148,000

37,000

15,000

7,400

11,322

Total

4

54

325,000

81,250

27,200

16,250

24,863

Financial Analysis

N.J. residents

6

72

526,000

131,500

39,400

26,300

40,239

NonN.J. residents

2

30

159,000

39,750

17,200

7,950

12,164

Total

8

102

685,000

171,250

56,600

34,250

52,403

^aThe severance and continuing benefits for the accounts payable manager total $29,073 and the severance and continuing benefits for the most experienced staff member in bank reconciliations is $19,714.

Note: When calculating severance using the total salaries, you must first find the average weekly salary (salaries/number of employees/52 weeks) [A28][A29]and multiply by the number of weeks of severance.Follow a similar process for health benefits.For 401(k) and payroll taxes, you may either follow the same process or apply the rate.

Table 7: Supplemental Information on Relevant Expenses

A.The benefits load of 25% of salaries is designed to represent the costs to provide health, dental and vision insurance, the employer contribution to the 401(k) plan, and employer payroll taxes.

1.The company's share of health benefits (including dental and vision insurance) is $10,000 per year for family (F), $7,200 for parent/children or employee/spouse (P/C) and $5,000 for single (S) employees.

2.The employer portion of payroll taxes is 7.65% of salaries.

3.The company contribution to the 401(k) plan is 5% of salaries.

B.The company has eight years remaining on its lease, and is unlikely to be able to reduce space unless it can create 10,000 square feet (one floor) of available space for sublease.Based on an average of 250 square feet per employee, staff in the New York office would need to be reduced by 40 or more.

1.The company pays $65 in rent per square foot in New York.The standard workstation is approximately 250 square feet per employee and office space of a department head and assistant are 500 square feet in total.

2.The rent per square foot is $25 in the service center in N.J., located just across the Hudson River from the New York headquarters.

C.The corporate expense allocation is for the company cafeteria and an on-site gym; the company's costs are unlikely to fall if staff in the Accounting Department is reduced.

D.PCs are leased and the company can return them with no penalty; 50% of the IT support costs are variable and can be saved when the PCs are eliminated.

E.The postage costs in accounts payable would not change by offshoring or relocation as the checks would be printed and mailed from the company's office in the U.S.

F.The company severance policy calls for two weeks of salary for each year of service with minimum payment of 12 weeks. Health benefits and retirement plan contributions continue to be provided during the severance period.Payroll taxes would also apply.

[i]Annual Report on the Insurance Industry, Federal Insurance Office of the U.S. Treasury, June 2013.

[ii] Nora Palugod and Paul A. Palugod, "Global Trends in Offshoring and Outsourcing,"Internal Journal of Business and Social Science, September 2011.

[iii]"The 2010 Federal Reserve Payments Study: Noncash Payment Trends in the United States: 2006 - 2009," updated April 5, 2011, Federal Reserve System.

[iv]Matthew Heller, "Electronic Payments 10 Times Cheaper Than Checks," CFO.com, October 12, 2015.

[v]Estimated staff reduction based on 600,000 checks supported by ten full-time employees (FTEs).Estimate 300,000 checks, or 50%, with similar level of FTE support per check. The necessary FTEs to support electronic payments (34% of payments) assume 25% time savings for electronic payments.The remaining 16% of payments are recurring electronic payments and estimate an 80% time savings.

[A1]Authors: Title is rather lengthy. Suggest alternative:

Costs for Decision Making: Differential Analysis of Cost Reduction Alternatives

[A2]Agreed

[A3]Doctor of Professional Studies (DPS), CMA and CPA

[A4]subhead is too long, suggest instead:

IMPACT ON SHORT-TERM PROFITS

[A5]agreed

[A6]Author: 10.1/11.7 = 0.8632478632478632, the proportion the first percentage is of the second.

When I then subtract that from 100% (= 1.0 in decimal format) I get 0.1367521367521368 which translates to 13.6% or rounded to 14%.

But you stated that the expense ratio for A.C.-U.S. was 15% better.

Wouldn't it actually be 14% better? Or have I made an error in my calculations or concept? Thanks.

[A7]Please change to 14%

[A8]The reference is to the recent years in the case, suggest deleting

[A9]Authors: rephrasing okay?

[A10]yes

[A11]Author: since these are synonyms we should settle one just one to use consistently. Since you've mentioned it is also called "offshoring," I've used that one.

[A12]That is acceptable

[A13]Author: you should specify what technology specifications you're talking about here, and why there are important for George's project.

[A14]Changed sentence

[A15]Author: change okay?

[A16]Yes

[A17]Authors: Please insert periods in the color key portion of the figure; it should read:

A.C. Global

A.C.-U.S.

Thank you.

[A18]Suggest using accroynm without periods through-out

[A19]Authors: We usually mention the full name of acronyms like SEC and GAAP on first mention:

Securities & Exchange Commission (SEC)

U.S. generally accepted accounting principles (GAAP)

But using that format here would disrupt the table layout because there's not much room. It would look odd. But I would suggest inserting them after reformatting table.

[A20]Suggest inserting a footnote at the bottom to define SEC and US GAAP

[A21]Author: ok?

[A22]Yes

[A23]Layout: Table 6 is in two parts; combine into one exhibit if feasible.

[A24]If feasible, unfortunately do not believe it can fit into 1 page

[A25]Authors: I assume you meant "Department head and assistant" and have spelled out. Abbreviate if it disrupts table layout.

[A26]Yes

[A27]LAYOUT: note Table 6 is in two parts; this starts the second part.

[A28]Author: shouldn't the first two terms be in brackets to ensure proper order of operations:

([salaries/number of employees]/52 weeks)

[A29]Yes