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  1. hook

    • Everything shld be made as simple as possible, but not simpler.
    • For Now, we would like you to keep this in mind and later on we will put this into context*******

  2. Names slide

    • Good morning, board of directors, ceos, LnG, I am Kim and he is Marco
    • Today we’ll talk about our overhead allocation system and what can do to make it better*******

  3. agenda

    • First, we will look at what’s wrong with the current overhead allocation method
    • Then cost drivers will be introduced to properly allocate some overheads
    • Next I will talk abt how to allocate the marketing costs
    • Finally Marco will talk about overheads that should be not distributed the branches*******

  4. Inappropriate method

    • As you all know our service is becoming more diversified *******
    • over the years weve witnessed an increasing proportion of overheads. So it is no longer appropriate to use revenue as allocation base. *******

  5. problems(con’t)

    • The method makes it hard to trace individual cost items for the purpose of controlling cost*******
    • It also penalized branches which try reli hard to control and generate more revenue
    • Outdated and unfair, introduce some more accurate cost drivers*******

  6. Costs related to # employees

    • First one being # employees
    • Identify and grouped several cost items, eg. The branch IT employee training cost, payroll administration cost, performance evaluation cost and education and training costs~# employees
    • Less employees in firm, lower employee related cost, not the case*******

  7. From 07-08, The cost incurred by each employee -5% decrease.

    • Number of employees of Taejon branch -45% decrease.
    • Therefore the branch in fact saved 48% on these costs.
    • However, allocated -30% more .
    • The efforts of cutting employees of Taejon branch are completely not recognized*******

  8. Cost drivers

    • Similarly, the cost of handling accidents shld be allocated based on # accidents handled by the branch*******
    • The cost of salesman training should be distributed based on the # of saleman in the branch*******
    • The cost of pc maintenance should be given out based on # pc in the branch*******+*******

  9. Accident handling cost

    • lets look at another numerical example on the cost of handling accidents
    • The cost of handling each accident- 35% increase
    • traffic accidents encountered by Taejon branch customers-42% decrease.
    • the cost incurred by Taejon branch decreased by 22.5%..
    • allocated 76% more on this cost
    • did not consider the efforts of Taejon branch to select low-risk customers and de-marketing. *******

  10. Marketing cost

    • Then we have marketing cost*******
    • Since no branch benefit more from the marketing campaigns than another branch*******
    • divided evenly across branches*******
    • At the end each branch will be allocated 1.27M marketing cost
    • Up next Marco will be leading you through the costs unrelated to branch activites, marco pls*******

Card Set:
2013-09-29 17:10:01

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