ACCT11-100 Lecture Notes - Lecture 1: Distributed Transaction, Forrester Research, E-Commerce

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almas8

8 Apr 2022

School

Bond University

Department

ACCT

Course

ACCT11-100

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Document Summary

Identifying the key value-adding factors underpinning productivity in the service sector has always been a significant challenge. With the advent of the world wide web and the broad diffusion of internet-enabled technologies and mechanisms such as electronic commerce, this challenge may well have become intractable. Much of the recent discussion of electronic commerce (ec) has focused on the business-to-consumer segment of ec activity. This seems natural, as there are over 100 million consumer households in the united states alone, making this a very large and attractive market. But as recent behavior of professional investors shows, the opportunities in business-to-business (b2b) ec may be much greater. A 1999 study by forrester research, a market research and consulting firm in. Cambridge, massachusetts, predicted that business-to-consumer ec will grow from billion in 1999 to billion in 2003. By comparison, b2b ec was expected to grow from billion in 1999 to over . 3 billion in 2003.

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Service Department Charges and Activity Bases

Middler Corporation, a manufacturer of electronics andcommunications systems, uses a service department charge system tocharge profit centers with Computing and Communications Services(CCS) service department costs. The following table identifies anabbreviated list of service categories and activity bases used bythe CCS department. The table also includes some assumed cost andactivity base quantity information for each service forOctober.

CCS Service Category	Activity Base	Budgeted Cost	Budgeted Activity Base Quantity
Help desk	Number of calls	$160,000	3,200
Network center	Number of devices monitored	735,000	9,800
Electronic mail	Number of user accounts	100,000	10,000
Handheld Technology support	Number of handheld devices issued	124,600	8,900

One of the profit centers for Middler Corporation is theCommunication Systems (COMM) sector. Assume the followinginformation for the COMM sector:

The sector has 5,200 employees, of whom 25% are officeemployees.

Almost all office employees (99%) have a computer on thenetwork.

One hundred percent of the employees with a computer also havean e-mail account.

The average number of help desk calls for October was 1.2 callsper individual with a computer.

There are 600 additional printers, servers, and peripherals onthe network beyond the personal computers.

All the nonoffice employees have been issued a handhelddevice.

a. Determine the service charge rate for thefour CCS service categories for October.

CCS Service Category	Service Charge Rate
Help desk	$	Per call
Network center	$	Per device monitored
Electronic mail	$	Per user or e-mail account
Handheld technology	$	Per device

b. Determine the charges to the COMM sector forthe four CCS service categories for October.

October charges to the COMM sector
Help desk charge	$
Network center charge	$
Electronic mail charge	$
Local voice support charge	$

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Pixel Studio, Inc., is a small company that creates computer-generated animations for films and television. Much of the companyâs work consists of short commercials for television, but the company also does realistic computer animations for special effects in movies. The young founders of the company have become increasingly concerned with the economics of the businessâparticularly since many competitors have sprung up recently in the local area. To help understand the companyâs cost structure, an activity-based costing system has been designed. Three major activities are carried out in the company: animation concept, animation production, and contract administration. The animation concept activity is carried out at the contract proposal stage when the company bids on projects. This is an intensive activity that involves individuals from all parts of the company in creating story boards and prototype stills to be shown to the prospective client. Once a project is accepted by the client, the animation goes into production and contract administration begins. Almost all of the work involved in animation production is done by the technical staff, whereas the administrative staff is largely responsible for contract administration. The activity cost pools and their activity measures are listed below: Activity Cost Pool Activity Measure Activity Rate Animation concept Number of proposals $ 6,400 per proposal Animation production Minutes of completed animation $ 7,000 per minute Contract administration Number of contracts $ 6,400 per contract These activity rates include all of the companyâs costs, except for the costs of idle capacity and organization-sustaining costs. There are no direct labor or direct materials costs. Preliminary analysis using these activity rates has indicated that the local commercial segment of the market may be unprofitable. This segment is highly competitive. Producers of local commercials may ask three or four companies like Pixel Studio to bid, which results in an unusually low ratio of accepted contracts to bids. Furthermore, the animation sequences tend to be much shorter for local commercials than for other work. Since animation work is billed at fairly standard rates according to the running time of the completed animation, this means that the revenues from these short projects tend to be below average. Data concerning activity in the local commercial market appear below: Activity Measure Local Commercials Number of proposals 27 Minutes of completed animation 15 Number of contracts 7 The total sales from the 10 contracts for local commercials was $230,000. Required: 1. Determine the cost of serving the local commercial market. 2. Prepare a report showing the margin earned serving the local commercial market. (Remember, this company has no direct materials or direct labor costs.)

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ACCT11-100 Lecture Notes - Lecture 1: Distributed Transaction, Forrester Research, E-Commerce

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