The activity matrix below shows the budget for the sales order department of Cognet Inc. Relevant information with regard to the operation of the sales order department is as follows: I A team of staff deals with existing customers in respect of problems with orders or with prospective customers enquiring about potential orders. ii The processing of orders requires communication with the production and despatch functions of the company. lii The nature of the business is such that there is some despatching of part-orders to customers which helps reduce stock holding costs and helps customers in their work flow management. Iv Sales literature is sent out to existing and prospective customers by means of a monthly mail shot. Cognet Inc has decided to acquire additional computer software with internet links in order to improve the effectiveness of the sales order department. The cost to the company of this initiative is estimated at$230,000 pa. It is estimated that there will be the following cost and volume changes to activities in the sales order department: (1) Reduction in overall salaries by 10% per annum, applied to the existing salary apportionments. (2) Reduction of 60% in the stores/supplies cost in the sales literature activity only. (3) $20,000 of the computer software cost will be allocated to the sales literature activity. The balance will be shared by the other activities in proportion to their existing share of IT costs. (4) Sundry costs for customer negotiation, processing of orders and implementing despatches will vary in proportion to the number of units of each activity. Sundry costs for sales literature and general administration will be unchanged. (5) Amended volume of activity will be: total customers 2,600; customer negotiations 6,000; home orders 5,500; export orders 2,000; despatches to customers 18,750. Recent industry average statistics for sales order department activities in businesses of similar size, customer mix and product mix are as follows: $300 Cost per customer per year Cost per home order processed Cost per export order processed Cost per despatch Sales literature cost per customer Average number of orders per customer per year Average number of despatches per order $50 $60 $8 $35 4.1 3.3 Activity cost matrix Sales order department Cost pool Total cost Customer Processing of Implementing Sales General negoti orders despatches liter. admin. ations ature Home Export $000 $000 $000 $000 $000 $000 $000 Salaries 500 80 160 100 90 20 50 Stores/ 90 16 6 8 60 Supplies IT 70 10 30 20 10 Sundry 80 8 10 6 20 10 26 costs Total 740 98 132 128 90 76 2,000 3,000 5,000 1,200 11,500 of customers negoti- orders orders despatches activity ations 216 Volume Required: (a)Prepare a summary of the amended activity cost matrix (per matrix above) for the sales order department after implementing the proposed changes. (b)Prepare an analysis (both discursive and quantitative/monetary as appropriate) which examines the implications of the IT initiative. The analysis should include the following A benchmarking exercise on the effectiveness of the sales order department against both its current position and the industry standards provided. You should incorporate comment on additional information likely to improve the relevance of the exercise. The activity matrix below shows the budget for the sales order department of Cognet Inc. Relevant information with regard to the operation of the sales order department is as follows: I A team of staff deals with existing customers in respect of problems with orders or with prospective customers enquiring about potential orders. ii The processing of orders requires communication with the production and despatch functions of the company. lii The nature of the business is such that there is some despatching of part-orders to customers which helps reduce stock holding costs and helps customers in their work flow management. Iv Sales literature is sent out to existing and prospective customers by means of a monthly mail shot. Cognet Inc has decided to acquire additional computer software with internet links in order to improve the effectiveness of the sales order department. The cost to the company of this initiative is estimated at$230,000 pa. It is estimated that there will be the following cost and volume changes to activities in the sales order department: (1) Reduction in overall salaries by 10% per annum, applied to the existing salary apportionments. (2) Reduction of 60% in the stores/supplies cost in the sales literature activity only. (3) $20,000 of the computer software cost will be allocated to the sales literature activity. The balance will be shared by the other activities in proportion to their existing share of IT costs. (4) Sundry costs for customer negotiation, processing of orders and implementing despatches will vary in proportion to the number of units of each activity. Sundry costs for sales literature and general administration will be unchanged. (5) Amended volume of activity will be: total customers 2,600; customer negotiations 6,000; home orders 5,500; export orders 2,000; despatches to customers 18,750. Recent industry average statistics for sales order department activities in businesses of similar size, customer mix and product mix are as follows: $300 Cost per customer per year Cost per home order processed Cost per export order processed Cost per despatch Sales literature cost per customer Average number of orders per customer per year Average number of despatches per order $50 $60 $8 $35 4.1 3.3 Activity cost matrix Sales order department Cost pool Total cost Customer Processing of Implementing Sales General negoti orders despatches liter. admin. ations ature Home Export $000 $000 $000 $000 $000 $000 $000 Salaries 500 80 160 100 90 20 50 Stores/ 90 16 6 8 60 Supplies IT 70 10 30 20 10 Sundry 80 8 10 6 20 10 26 costs Total 740 98 132 128 90 76 2,000 3,000 5,000 1,200 11,500 of customers negoti- orders orders despatches activity ations 216 Volume Required: (a)Prepare a summary of the amended activity cost matrix (per matrix above) for the sales order department after implementing the proposed changes. (b)Prepare an analysis (both discursive and quantitative/monetary as appropriate) which examines the implications of the IT initiative. The analysis should include the following A benchmarking exercise on the effectiveness of the sales order department against both its current position and the industry standards provided. You should incorporate comment on additional information likely to improve the relevance of the exercise