Do-It-Yourself Building Center

DIY is a short, non-directed, qualitative case that tests the following techniques:

forecasting sales and costs

activity-based management, and

value-adding activities.

SUGGESTED ANSWER

To: CEO

From: Controller

Subject: Determining the Profitability of the Call Centre

Root Issue

The root issue is call centers profitability

(Relatedly/relevant issues that can be considered: Does the call-centre service lead to sales? Do the expected sales exceed expected costs? Can call centre costs be reduced?)

Suggested Analyses presented in Brief (can vary but be rationalized, as details as possible, according to the identification of the relevant problem/s)

The CEO has requested this project, which is to determine what information is needed to determine whether the call centre is profitable.

Currently, the call centre callers are verified as to a DIY credit card, this has nothing to do with sales, future or past. There is no indication that the calls lead to sales or the sales or more specifically the contribution margin from the sales exceed costs.

Although there is customer satisfaction, there is a need to subject the activities to ABM to ensure the elimination of non-value adding activities and improve the efficiency and effectiveness of value-adding activities.

Suggested Recommendations (can vary but be rationalized as per the identification of the relevant problem/s)

To determine the profitability of the call centre, a random sample of callers needs to be selected to for analyses. The individual callers will need to be assessed as to: their purchases in the past, the relationship of the call to their purchases and the likelihood of the service leading to future purchases. In addition, it will be necessary to ascertain the satisfaction of callers with the call centre. From this sample, the revenues and costs coming from the call centre will need to be assessed in order to determine profitability.

In order to reduce costs, all activities will need to be documented and analyzed. Non-value added activities will need to be eliminated. The efficiency and effectiveness of value-adding activities will need to be improved in order for benefits to exceed costs

Conclusion: This report should be assessed immediately in order for the information to be gathered as soon as possible.