Excercise 1

A business locate d in the inner settlements of Agder has made a comparison (so-called benchmarking) with other companies in the same industry. The marketing department turns out to be low cost effective. The total market costs per NOK traded is far higher than comparable businesses, and developments have been negative over time.

The marketing manager must withstand criticism at the leadership meeting (which naturally takes place digitally in these turbulent times), and get in mission "to do something about it". As a result of your skills that you have acquired at HH, are you hired as a consultant to assist the marketing manager in this work.

Total expenses in the marketing department were 5,280,000 last quarter (January, February and March)

The costs are divided into four activities as indicated below. The cost distribution is

based on a digital questionnaire to employees where all employees indicate what proportion of their time they spend have used for the various activities.

Costs January, February and March 2020

General administration 800,000

Order Management 3 136 000

Customer requests 448,000

Credit control 896,000

Total cost 5 280 000

In principle, all employees except the marketing manager can perform work in all activities which is carried out in the department. It is therefore difficult to specify the capacity of the department within the individual activities.

In the last quarter, 49,000 orders have been executed, 1,400 requests have been handled and 2,500 credit checks (checks) have been performed.

Time studies show that on average it takes 7 minutes to handle an order, 30 minutes to

Handle a customer request and 45 minutes to do a credit check. We ignore

the marketing manager, the department has 28 full-time employees, ie 8 hours per day, 22 days per month.

Of this time it is reasonable to assume that approx. 80% is practical capacity.

(a) The Marketing Manager proposes to use a "regular" ABC calculation to get a starting point overview of cost level (cost per driver) within the various activities. Show how this can be done.

(b) You suggest that an analysis based on Time-Driven should be based on ABC. Show how this can be done. Explain general benefits and benefits Disadvantages of Time-driven ABC compared to traditional ABC and illustrate the differences specifically based on the two analyzes you have set up.

(c) The Marketing Manager has been offered the lease of an order processing system which is expected to reduce the average order processing time to 6 minutes. License costs for the new system are 100,000 per month. What advice would you give marketing manager? Justify the answer.

The marketing manager is wondering about the original order processing time estimate (7 minutes) is set too low. Having raised the issue with several of its employees, it turns out that the estimate is calculated on the basis of the treatment of only ordinary - existing customers. It is known that handling new customers takes at least 10 minutes extra. Also, will the handling of foreign customers take some extra time.

(d) The Marketing Manager wants to show the extent to which new customers and foreign customers Customers influence costs. Discuss how this can be handled respectively traditional and Time-driven ABC.