please answer questions below based on case Her effort has, to some extent, compensated for the dwindling library budget and allowed the library to create and maintain an exceptional, albeit unusual, library offering.

Moreover, the university library has acquired a unique academic reputation due to some of the rare holdings acquired through the donations department's efforts.

Both academics and graduate students from other universities make use of Inglis University's peculiar library resources. Perhaps more importantly, the number of students seeking specialized graduate studies at Inglis (especially in the areas of literature, mathematics, and ancient folklore) has increased significantly. There is some evidence to suggest that this is due, at least inpart, to the increased visibility of the university, along with the research potential afforded by the unique resources accumulating at the university's library (due almost entirely to the success of the donations department's activities).

The Inglis University Library donations department is operated by the head librarian,Asenath James, and a graduate assistant, Randolph Carter, a folklore student at InglisUniversity.

The head librarian is a salaried position ($48,000 per year), and since Asenathcurrently spends approximately one-quarter of her time soliciting and processing book donations, one-fourth of her contracted annual base salary ($12,000) is allocated to the bookdonations department.

The Inglis University Library is also allotted $5,200 per academic year in additional funds to support the library donations function. This meager sum is used to provide a graduate work-study student a stipend to assist Asenath in the donations department during the fall and spring semesters. Work-study students typically work 20 hours per week and are paid on an hourly basis at a rate of $10 per hour.

A typical semester is 13 weeks long. Currently, Randolph is working all his allotted hours in the book donations department. If he were not fully utilized by the book donations department, hewould work elsewhere in the university, as his work hours and stipend are guaranteed as a part of his financial aid program.

In addition, the library has allotted a small space in the basement of its main building for donations activities. The library allocates a portion of the library's general facilities costs ($1,200 per year). General facility costs include depreciation on the building, property taxes, insurance, general maintenance costs, and utilities.

Since the library's catalog system is computerized, the only other applicable cost is for the RFID inventory tags, which are relatively minimal and run about $0.50 per book; these RFID tags are purchased by the library as needed.

Typically, Asenath and her assistant solicit and process an average of 1,000 books per academic year and can, without too much difficulty, solicit and process up to 1,200 books per academic year. However, each year for the past five years, the number of books donated and processed for the library has increased noticeably.

Unfortunately, Asenath, as head librarian, has library duties other than donations and cannot devote any additional time to the donations department. Randolph's current work-study contract is restricted to only 20 hours per week and only applies to the fall and spring semester.

Asenath has no additional help during the summer months, which creates quite a backlog of unprocessed books going into the fall semester. Of late, Asenath and Randolph have begun to experience difficulty processing the increasing number of book donations, and some recent acquisitions are still sitting in boxes on the floor of the donations department's basement space.

Consequently, the library has approached the university budget committee with a request to increase the role of students by adding Funds allotted to the book donations department by $5,000 per year.

These additional funds would be used to employ part-time students to work during the fall and spring semester.

This would increase the department's annual capacity to approximately 2,000 books.

a. Using the cost information provided by the library, the budget committee computed a unit cost per book of $18.90, calculated as follows:

Librarian salary allocation $12,000

Graduate assistant stipend $5,200

Facility cost allocation $1,200

Total costs $18,400

Per book (based on 1,000 books) $18.40

RFID tag per book $.50

Total unit cost $18.90

b. The University Budget Committee has since denied the request for additional funds and expressed the following sentiments. ''First, the unit cost of $18.90 per donated book is already too high; an additional $5,000 per year would bring the cost per book to $23.90 per book, an entirely unacceptable cost for the processing of an old used book.

Librarian salary allocation $12,000

Graduate assistant stipend $5,200

Facility cost allocation $1,200

Part-time student help $5,000

Total costs $23,400

Per book (based on 1,000 books) $23.40

RFID tag per book $.50

Total unit cost $23.90

c. ''Second, at the already-high cost of $18.90 per book, the library can hardly afford to accept more than 1,000 books per year; if, for instance, the library were to accept 2,000 books, it would cost the university $37,800.

d. Finally, we have serious doubts as to the valueof the donations department; if it were eliminated entirely, the university could save, at the very least $23,900 per year. These savings could be used to support some other, moreworthwhile function within the library.''

Librarian salary allocation $12,000

Graduate assistant stipend $5,200

Facility cost allocation $1,200

Part-time student help $5,000

RFID tags ($.50 _ 1,000 books) $500

Total savings $23,900

Case Requirements

1. Explain what is meant by an activity measure. Identify an appropriate activity measure for analyzing the cost structure of the book donations department within the university's library. Justify your answer. Is the activity measure you identified a true cost driver? Explain.

2. Cost Analysis:

a. Identify each cost associated with the library's book donations department.

b. Classify each cost associated with the library's book donations department as fixed or variable.

c. Classify each cost associated with the library's book donations department as direct or indirect, assuming that the cost object of interest is the book donations department as a whole. Justify your classifications. Would your classifications change if you were to assume that the cost object of interest were an individual book processed?Explain.

3. Explain what is meant by a unit cost. Is the initial unit cost used by the budget committeecomputationally appropriate? Explain. Does the inclusion of fixed costs as a component of the unit costs make it problematic for managerial analysis purposes?

an Excel Spreadsheet with: a. YourCalculation, b. University Budget Committee Calculation, c. Budget Committee Calculation for Doubling Book Donations from 1,000 to 2,000 books, d. Budget Committee Calculation for eliminating entire Used Book Operation, and e. Your Own Expansion Calculation

4. a written Suggestions to Library Director

Plus:

5. Which course of action do you recommend to the Library Director, and why?

6. What was the best acquisition by AsenathJames and why?

Your Name Class & Sect. Date Inglis Univ. Library New Worksheet Activity Measure: Books Donated Books Processed