Question is 8-11.

366 Chapter 8 n capacities, lease fees, and the demand for purple dog chewies e rights over how large a machine to leave How big a machine w how many chewies will be produced and sold? (Show calculator c. Comment on Sunder's policy of not changing fixed costs to pro capacity exists. hewies, as well as the decision hine will the manager lease and alculations, neatly labeled.) costs to products whenever excess Web-based marketing strategies Server Operations maintain designing and operating Internet mar rowing rapidly, but it only shows a Server Operations, and the Crawler Categies for external clients, includ- Operations maintains the cli- operates WwWeb's proprietary search carch. In addition to these three profit b's servers and telecommunication lines budget is $548,000 for personnel, hardware osts. The cost of the IT group is not the IT group is a common website or performing a Web used capacity on our systems we should be P 8-11: WwWeb Marketing WwWeb Marketing is a decentralized firm specializing in designing and keting websites. The firm is four years old and has been growing up small protit. WWWeb has three profit centers: Design Division, Server Division. The Design Division devises Internet marketing strategies for en ing innovative websites and Web-based marketing strategies. S ents' websites on WwWeb's servers. The Crawler Division operates w engine that clients can use for Internet based marketing research. In addition to centers, WwWeb has an IT group that maintains wwWcb's servers and telecom to the Internet. The IT group is a cost center. The current annual IT budest is $548,000 for person and software leases for the servers, and telecommunication costs. The cost of the allocated back to the three divisions. The CEO of wwWeb argues that the IT group (shared) resource and is essentially a fixed cost Mine another client website or performing search does not generate any additional IT cost to the firm because WwWeb's IT group has capacity. WWWeb's CEO argues, "Any charge for IT back to the divisions will cause the charge for IT back to the divisions will cause the divisions to avoid using our IT resources. As long as we have unused capacity on our systems we encouraging our people to use that capacity." WWWeb currently uses about so recent of the canacity of its servers, routers, and fiber optic high-speed lines to the Internet. The hich-speed lines are the pines through which all client server Web traffic flows. These high-speed lines are also used by wwwch's e-mail traffic and the Crawler Divisions marketing research Web searches Currently the IT systems are performing well and WWWeb users experience few delays and minimal interference from other users. However, the three profit center managers are projecting growth in their businesses and expect to reach capacity on their servers and communication lines within the next 12 months. When this happens, the managers predict that they will experience significant service degradation Jose Coronas, head of WWWeb's IT group, has called a meeting of the three division managers to discuss the terrifie deals being offered by telecom companies and hardware providers. Given the current slump in the economy, WwWeb can roughly double the capacity of its servers and high- speed access lines and lock in these low rates for two years. The incremental cost of doubling the IT group's capacity is to raise its hardware lease costs and access line costs by 20 percent. IT currently spends $18.000 a month on hardware leases and access lines. If it were to double its existing capac- ity, the total monthly cost would rise to $21,600. Mr. Coronas believes his existing IT personnel can handle the additional server and line capacity. Coronas and the three division managers recommend that WwWeb acquire the additional capacity and lock in these attractive rates. Required: Analyze WWWeb's current policy of how the three divisions are charged for IT costs and whether WwWeb should acquire the additional capacity. b. Should WwWeb change its policy of how it charges IT costs to the divisions? If so, what changes would you recommend? ITI Technology ITI Technology designs and manufactures solid-state computer chips. In one of the ments, employees fabricate 366 Chapter 8 n capacities, lease fees, and the demand for purple dog chewies e rights over how large a machine to leave How big a machine w how many chewies will be produced and sold? (Show calculator c. Comment on Sunder's policy of not changing fixed costs to pro capacity exists. hewies, as well as the decision hine will the manager lease and alculations, neatly labeled.) costs to products whenever excess Web-based marketing strategies Server Operations maintain designing and operating Internet mar rowing rapidly, but it only shows a Server Operations, and the Crawler Categies for external clients, includ- Operations maintains the cli- operates WwWeb's proprietary search carch. In addition to these three profit b's servers and telecommunication lines budget is $548,000 for personnel, hardware osts. The cost of the IT group is not the IT group is a common website or performing a Web used capacity on our systems we should be P 8-11: WwWeb Marketing WwWeb Marketing is a decentralized firm specializing in designing and keting websites. The firm is four years old and has been growing up small protit. WWWeb has three profit centers: Design Division, Server Division. The Design Division devises Internet marketing strategies for en ing innovative websites and Web-based marketing strategies. S ents' websites on WwWeb's servers. The Crawler Division operates w engine that clients can use for Internet based marketing research. In addition to centers, WwWeb has an IT group that maintains wwWcb's servers and telecom to the Internet. The IT group is a cost center. The current annual IT budest is $548,000 for person and software leases for the servers, and telecommunication costs. The cost of the allocated back to the three divisions. The CEO of wwWeb argues that the IT group (shared) resource and is essentially a fixed cost Mine another client website or performing search does not generate any additional IT cost to the firm because WwWeb's IT group has capacity. WWWeb's CEO argues, "Any charge for IT back to the divisions will cause the charge for IT back to the divisions will cause the divisions to avoid using our IT resources. As long as we have unused capacity on our systems we encouraging our people to use that capacity." WWWeb currently uses about so recent of the canacity of its servers, routers, and fiber optic high-speed lines to the Internet. The hich-speed lines are the pines through which all client server Web traffic flows. These high-speed lines are also used by wwwch's e-mail traffic and the Crawler Divisions marketing research Web searches Currently the IT systems are performing well and WWWeb users experience few delays and minimal interference from other users. However, the three profit center managers are projecting growth in their businesses and expect to reach capacity on their servers and communication lines within the next 12 months. When this happens, the managers predict that they will experience significant service degradation Jose Coronas, head of WWWeb's IT group, has called a meeting of the three division managers to discuss the terrifie deals being offered by telecom companies and hardware providers. Given the current slump in the economy, WwWeb can roughly double the capacity of its servers and high- speed access lines and lock in these low rates for two years. The incremental cost of doubling the IT group's capacity is to raise its hardware lease costs and access line costs by 20 percent. IT currently spends $18.000 a month on hardware leases and access lines. If it were to double its existing capac- ity, the total monthly cost would rise to $21,600. Mr. Coronas believes his existing IT personnel can handle the additional server and line capacity. Coronas and the three division managers recommend that WwWeb acquire the additional capacity and lock in these attractive rates. Required: Analyze WWWeb's current policy of how the three divisions are charged for IT costs and whether WwWeb should acquire the additional capacity. b. Should WwWeb change its policy of how it charges IT costs to the divisions? If so, what changes would you recommend? ITI Technology ITI Technology designs and manufactures solid-state computer chips. In one of the ments, employees fabricate