Better understanding of your customers’ profitability picture is imperative for survival in today’s competitive environment. Here the CFO of an employment services company used ABC to analyze the company’s profitability picture at the customer channel- an

Using activity-based costing to assess channel/customer profitability: better understanding of your customers’ profitability picture is imperative for survival in today’s competitive environment. Here the CFO of an employment services company used ABC to analyze the company’s profitability picture at the customer channel- and individual customer-level

DeWayne L. Searcy

“With better information and accounting systems, firms are beginning to disaggregate revenues and costs to customer or account level. This analysis often reveals previously hidden subsidies across customers, products, and markets.” (1)

Most firms are well aware of the 80/20 rule in which a small fraction of customers accounts for a large share of revenues and most of a firm’s profits. As the above quote states, that small fraction of profitable customers subsidizes the firm’s other unprofitable or, at best, breakeven customers. Instead of accepting the 80/20 rule, firms should strive to identify those subsidized customers and work with them in either altering the servicing of those customers (including pricing) to a more equitable arrangement or outsourcing the servicing of those customers altogether.

Temp Employment Company, Inc. (TEC), a firm in the employment services industry, used Activity-Based Costing (ABC) in assessing the profitability picture in order to better understand which customers were profitable and which were subsidized. This article describes the journey of TEC’s chief financial officer through the ABC implementation and subsequent analysis. (Note: The name of the actual company has been changed and the financial data altered to protect the company’s confidentiality.)

ABC AND THE FIRM

TEC is a multi-office employment services firm offering temporary employment and permanent placements. The temporary employment division represents over 70% of TEC’s business and is the focus of this article. Before covering how TEC used ABC information to assess its profitability picture, TEC’s ABC implementation will be briefly discussed. Table 1 summarizes the four-step process TEC completed in transforming its cost management system.

Step 1. Develop the activity dictionary.

In the first step, TEC was divided into activities. It would have been possible to divide TEC into several activities, but it was important to develop a simple, yet meaningful, system. Three activities were defined as relevant to the operations of the firm: 1) filling work orders, 2) hiring temporary employees, and 3) processing payroll/billing.

The filling work orders activity begins once an order is received from a customer and ends when the customer is provided with the name(s) of the temporary employee(s) assigned to work for them. The hiring temporary employees activity involves the process of hiring employees for temporary assignments. This activity begins when an application is completed and ends once the employee is debriefed on company polices and entered in the system. The last activity, processing payroll/billing, involves the weekly payroll and customer billing process.

Step 2. Determine how much the organization is spending on each of its activities.

Once the activities were identified, the CFO assigned the direct costs associated with each one. Any resource that could not be directly traced to an activity was initially assigned to a general overhead account. Once the directly traceable resources were assigned to each activity, the general overhead was allocated. Table 2 summarizes the results of assigning the costs to the three activities of TEC. The general overhead was allocated to each activity on the basis of the directly traceable costs of each activity to total directly traceable costs.

Step 3. Identify the organization’s products, services, and customers.

As mentioned earlier, TEC offers two services, temporary employment and permanent placements. Within each service offering, TEC’s customers are separated between two channels, industrial and clerical, depending upon the job classification of the position they are seeking to fill. Industrial customers hire temporary employees to fill touch-labor positions (such as assembly, machine operator). On the other hand, clerical customers seek to hire office positions (such as receptionist or secretarial).

Step 4. Select activity cost drivers that link activity costs to the organization’s products, services, and customers.

The goal of identifying a cost driver for an activity is to determine the source that causes the consumption of that activity–what drives the activity. The cost driver identified must be quantifiable and reasonably accessible. The three activities and the related cost drivers are discussed next.

FILLING WORK ORDERS

The first activity identified was “filling work orders.” As stated earlier, customer service coordinators begin to fill work orders once a customer calls in a request for a temporary employee. If a customer does not call in an order, there is no work order to fill. It makes sense then that the cost driver for the “filling work orders” activity is the number of temporaries ordered by customers. This is used as the cost driver instead of the number of orders generated because an individual order can be for more than one temporary employee. The more temporaries on an order, the more servicing of the account is required. Thus, the number of temporaries ordered is a better indicator of resources consumed by the activity than the number of orders.

HIRING TEMPORARY EMPLOYEES

The company cannot hire temporaries unless someone comes in seeking employment. The cost driver used for “hiring temporary employees” is the number of applicants seeking employment. Each person seeking employment at TEC requires significant resources and time before he/she is eligible for a job assignment.

PROCESSING PAYROLL/BILLING

Processing a paycheck for each employee and generating an invoice for each customer is performed weekly and is based on the number of hours worked. Because each hour worked requires this activity, the number of hours worked during the period in question appears to be the best cost driver for the “processing payroll/ billing” activity.

Step 5. Calculate activity rates for each activity identified.

TEC added another step, which was to calculate the activity rate for each activity identified. The following activity rates were calculated (see Table 2):

Filling work orders $48.2390

Hiring temporary employees $26.5710

Processing payroll/billing $ 0.1655

The information collected from these five steps was used to assess TEC’s profitability at the customer level. Customer profitability analysis was conducted in three stages. The first stage assessed customer-channel profitability (industrial and clerical channels). In the second stage, the information obtained from the first stage was used to assess classes of customers within each channel. Finally, the third stage involved assessing the profitability of individual customers.

CHANNEL PROFITABILITY

Table 3 displays the profitability picture by customer channel. When the gross margins are examined, major differences between the channels become apparent. TEC’s margin in the industrial channel is significantly less than its margin in the clerical channel. The industrial customers demand lower rates for temporary employees, but the tight labor market prevents TEC from lowering wage rates. Also, industrial customers have significantly higher workers’ compensation rates than clerical customers, which we will discuss later. Customers in the clerical channel demand quality over price, so a higher bill-to-pay rate is permissible.

In allocating activity cost between channels for the “hiring temporary employees” activity, the CFO discovered there was no easily accessible procedure for determining if an applicant applied for clerical or industrial employment. That information is documented only if the applicant is hired by TEC. For the initial analysis, the CFO decided to use the ratio of the number of temporaries ordered by channel to total temporaries ordered across both channels. Multiplying this ratio by the total number of applicants provided the number of applicants for each channel.

There is some logic with the formula. The number of temporaries ordered determines the types of temporaries needed; this, in turn, forces the firm to focus its energies on hiring those types of temporaries. In other words, there is a close relationship between the number of temporaries ordered and the type of individuals applying for employment at TEC. Procedures were instituted to capture the relevant information during the application process to assign “hiring temporary employees” costs more accurately to the appropriate channel in the future.

As shown in Table 3, the industrial channel comprises only 16% of total company profits, while its sales are over 86% of total company sales. The channel’s net profit is only 0.3% of sales. In sharp contrast, the clerical side shows profits of 8.2% of sales. From the initial analysis of Table 3, the CFO began to see potential signs of trouble. TEC’s largest customer channel is on the verge of going into the red. The clerical channel does not have enough sales to support the entire company for any length of time. Conclusion: The industrial channel must be an income producer for the overall success of the company. The initial analysis shows overall signs of weakness, but the CFO decided to analyze the industrial channel in more detail by applying ABC to the three classes of customers in the industrial channel to identify problems better.

INDUSTRIAL CLASS PROFITABILITY

By examining the composition of the industrial channel, the CFO discovered it was possible to divide the channel into three classifications by workers’ compensation (WC) rates. As previously stated, the industrial customers are charged a much higher workers’ compensation rate than clerical customers. In addition, there is a wide range of rates charged within the industrial channel. The industrial customers are divided into three classes by workers’ compensation rates: Low WC class (WC rates under $5.00/$1,000 of wages paid), Average WC class (WC rates $5.00 to $8.99/$1,000 of wages paid), and High WC class (WC rates $9.00 and over/$1,000 of wages paid). Table 4 displays the cost allocation of the industrial channel by workers’ compensation rates.

Low WC class

The Low WC rate class is 20% of the total industrial channel, but it is responsible for over 400% of the industrial channel profits. An obvious conclusion is that the company is incurring losses elsewhere (i.e., the Low WC rate class is subsidizing other unprofitable customers). TEC budgeted an 18% gross margin for the industrial channel; the Low WC class’s gross margin is in line with the budget. From this analysis, the Low WC class appears to be contributing to the overall success and profits of the company. The goal of TEC should be to maintain the current pricing arrangements for these customers. The company also should look into targeting industries that would fall into this class to increase the sales volume and, in turn, the net profits of the company.

High WC class

As expected, the gross margin is lower in the High WC class than in the other classes due to the large increase in the WC rate. What is surprising, however, is that the wages paid to the temporary employees are over 73% of sales as compared to just over 70% for Low WC class employees. Ideally, higher rates should be charged to those customers with higher variable costs, but the company is unable to do so because of the competitive nature of the industry. The low gross margin is partly attributable to one customer who accounts for nearly 70% of the total sales generated in this class. The customer, a trailer manufacturer, is a consistent user of long-term temporaries. TEC conceded a price break to the customer due to the high-volume use of temporaries.

The High WC class generates a net profit even with the low gross margin. The overhead allocation is significantly less than with the other two classes because of the long-term nature of the assignments of the temporary employees in this class. Only 165 temporaries were ordered during the period of analysis. The low number of temporaries ordered (the cost driver for the “filling work orders” activity) results in the class being allocated less cost for the “filling work orders” activity.

Average WC Class

The last class in the industrial channel to examine, the Average WC class, is suffering from a net loss. The largest class in relation to total sales volume, it is also allocated over 77% of the overhead costs based on the activity analysis and is responsible for only 69% of the industrial sales. Is the Average WC class being penalized with excessive overhead allocation? No. The customers in the Average WC class consume considerable time and effort to service.

The typical job assignments within this class vary from one day to several weeks. Customers order from one to more than 20 temporaries for these assignments, and customer service coordinators are continually searching for temporaries to fill these jobs. The firm’s classified advertisements heavily recruit for employees in this class, and the heavy recruitment means more individuals apply for employment. The Average WC class should be allocated a large portion of overhead. The activity analysis accomplishes that task.

Examining the net profits shown in Table 4 demonstrates the classic whale-curve effect. The Low WC class generates over 400% of total profits while the Average WC class loses over 400% of total profits. This leaves the profits generated by the High WC class comprising nearly 100% of the industrial channel profits. Even at this second stage of analysis, areas that need further investigation are revealed.

CUSTOMER PROFITABILITY

Table 5 summarizes the activity analysis of the four largest customers of TEC according to sales volume. The four customers account for almost 42% of the total sales volume of the company and over 48% of the industrial channel sales. Using activity-based costing, an analysis of these four customers was undertaken to uncover problem areas with them.

Chemical Company

TEC supplies 100% of the chemical company’s production and supervisory personnel. Initial results indicate a net profit of 9.8%, much higher than even the clerical channel net-profit percentage. One reason for this is the low overhead allocation to this customer. For example, under the “filling work orders” activity, only 86 temporaries were ordered, a relatively low number. One of the reasons for this is the long-term nature of the assignments. Another reason is the hiring practices of the company. The chemical company has one person on-site to recruit employees. Once the chemical company hires a recruit, TEC is notified about the new employee, and the application is sent to him or her. For these two reasons, the overhead consumed by the chemical company is minimal as compared to other customers. As long as the company continues the use of an on-site coordinator to recruit, it should continue to generate profits for TEC.

Trailer Manufacturer

Similar to the chemical company, the trailer manufacturer requests long-term employees. Orders for the trailer manufacturer are for normal turnover and peak periods of production. For the period under examination, only 56 temporaries were ordered, normal for the time of year. The gross margin for the customer is uncomfortably low due to the billing arrangement with the customer and the high WC rates incurred. Because the customer does not consume a large portion of the activities identified, however, it is not burdened with a high overhead allocation and is generating just over 3% net profit. As long as the trailer manufacturer maintains the low consumption of activities, TEC should be able to maintain the current profit level.

Newspaper Publisher

The newspaper company is a good example of the typical customer in the Average WC class. It manages its temporary employment needs differently from the other two customers discussed. The customer calls daily to order the number of temporaries needed that night, usually ranging from 10 to 40 individuals. Customer service coordinators are constantly searching for temporaries to fill the needs of this customer. The newspaper publisher consumes a significantly higher proportion of activities than the other two customers.

One of the peculiar situations regarding this company is the standing request by a few of the temporary employees themselves to work at the newspaper publisher. As a result, the customer service coordinators only have to call the temporaries and ask what shift they want to work. Even though the company requested 928 temporaries during the time period investigated, some of those requests were filled rather easily. How was the situation handled by the activity-based costing model? Basically, the situation was ignored. The newspaper company was allocated the same rate no matter how easy or difficult it was for TEC to fill the orders. This was one of the deficiencies of the activity analysis performed by the CFO.

Table 5 illustrates some startling results for the newspaper publisher, the first being the low gross margin. The culprit is the low ratio of bill-to-pay rates. TEC was required to lower its rates to retain the customer. The low bill rates along with the high overhead allocation result in a large net-loss situation. The company is allocated 27% of the “filling work orders” activity while accounting for just over 6% of the industrial channel’s revenue. A similar pattern holds true for the “hiring temporaries” activity. Some tough decisions must be addressed regarding the future of servicing the newspaper publisher.

Food Processing Company

The company uses temporary employees for its production line on a consistent basis throughout the year, with a mix of long- and short-term assignments. As displayed in Table 5, the company generated higher sales than the newspaper publisher, but it only had requests for 332 temporaries as compared to 928. The gross margin for the food processor is the highest among the customers examined, but the high gross margin does not offset the activities consumed by the customer. The bottom-line result is a net loss. As with the newspaper publisher, TEC must address the net-loss situation.

FINAL ANALYSIS

The activity analysis conducted by the CFO generated some startling results. It reaffirmed some beliefs and destroyed others held by TEC’s management. The company held to the notion that the sales composition of the company was 60% industrial and 40% clerical. Table 3 clearly indicates the composition as 85% industrial and 15% clerical. This is one explanation for the overall weak profit. As explained earlier, the industrial customers traditionally generate lower profits. Driving the analysis to the industrial channel class provides a richer description of TEC’s profitability picture.

Table 4 shows that the largest industrial class, the Average WC class, is generating significant losses. In other words, almost 70% of the company’s business is generating losses. What can be done to reverse this situation? An immediate response might be to attempt to increase the bill rates charged, but the industrial temporary employment industry is very elastic, and any attempt at increasing rates will produce an immediate decrease in demand. Another area of concern is the pay rates. TEC has been forced to increase the pay rates due to the low unemployment rate. The pool of temporary employees is small, so they demand a higher rate. Because the company cannot raise billing rates or lower pay rates, the only area available for improvement is overhead reduction.

Some revealing results are encountered in Table 5. TEC’s first problem is with the newspaper publisher. The bill rates and pay rates are fixed, so can the overhead allocated to this customer be lowered? One way is to change the way the customer requests and uses temporaries. As mentioned earlier, the customer calls daily with an order for temporaries and is unconcerned whether the temporaries are new or repeats. A preferred method would have the customer call, or be called, once a week with an order for the entire week. The temporaries could be assigned on a weekly basis. Also, an analysis of the number of temporaries usually ordered would be helpful to determine if a small core of long-term assignments could be employed. This method would reduce the consumption of activities by the customer and turn it into a profitable venture for TEC.

A key point: A reduction in the overhead allocated to a customer will not, in and of itself, reduce the overhead incurred by the company. Activity-based costing does not reduce costs–it only reallocates them based on the consumption of activities identified. As a result, a customer who begins to consume fewer activities without the simultaneous reduction in overhead by the company will only result in a shifting of overhead allocation to another customer, creating a possible death spiral effect. Once a customer consumes fewer activities, the company must either permanently remove the associated overhead to benefit from the reduction in costs consumed by the customer or utilize the freed capacity to generate additional revenue.

Overall, the activity analysis described here has shown that activity-based costing can be used as a strategic tool. It produced useful information to provide management with direction for costing and marketing strategies. The ABC model used will allow for better-informed decision making at TEC. Traditionally, TEC used gross margin analysis to set prices and develop budgets. Now it can use ABC for setting prices and developing budgets. This case study also demonstrates that ABC information can be used for more than just costing products and services: It can be used to develop a firm’s profitability picture.

Developing strategic initiatives designed to transform TEC’s unprofitable customers into profitable customers is the CFO’s next challenge. In addition, the activity analysis will assist in bidding for contracts in the future. Before the ABC analysis, a bid was prepared without understanding the true cost of servicing the contract. As a result, the company was awarded contracts in the past that did not generate profits. By using ABC, the company can better understand the costs associated with servicing a contract and provide a competitive bid that, if won, will be profitably serviced.

Table 1: Four Steps in

Developing an ABC System

1. Develop the activity dictionary.

2. Determine how much the organization is spending

on each of its activities.

3. Identify the organization’s products, services, and

customers.

4. Select activity cost drivers that link activity costs to

the organization’s products, services, and customers.

R. S. Kaplan and R. Cooper, Cost & Effect: Using Integrated Cost

Systems to Drive Profitability and Performance, Harvard Business

School Press, Boston, Mass., 1998.

Table 2: Temp Employment Company, Inc.

Activity-Rate Calculations

ACCOUNT FILLING HIRING

NAME TOTAL WORK ORDERS TEMPORARIES

Salaries & wages $125,638 $57,501 $16,197

Payroll taxes 11,192 5,118 1,442

Advertising 55,896 25,494 30,402

Automotive 15,718 7,722 —

Telephone 11,746 7,048 2,349

Rent 9,600 2,400 2,400

Other Operating Expenses 91,144 10,760 1,961

Total Operating Expenses $320,934 $116,043 $54,751

Allocation of General Overhead 74,307 35,059

$320,934 $190,350 $89,810

Cost drivers

# of temporaries ordered 3,946

# of applicants 3,380

# of hours worked

Activity rates $48.239 $26.571

ACCOUNT PROCESSING GENERAL TOTAL

NAME PAYROLL OVERHEAD ALLOCATED

Salaries & wages $12,308 $39,632 $125,638

Payroll taxes 1,095 3,537 11,192

Advertising — — 55,896

Automotive — 7,996 15,718

Telephone 2,349 — 11,746

Rent 4,800 — 9,600

Other Operating Expenses 4,305 74,118 91,144

Total Operating Expenses $24,857 $125,283 $320,934

Allocation of General Overhead 15,917 (125,283) $–

$40,774 $– $320,934

Cost drivers

# of temporaries ordered

# of applicants

# of hours worked 246,370

Activity rates $0.1655

Table 3: Temp Employment Company, Inc.

Profitability Analysis by Customer Channels

CLERICAL % INDUSTRIAL %

Sales $294,714 100.0% $1,859,852 100.0%

Cost of Sales

Wages-Temporary employees 200,377 68.0% 1,323,827 71.2%

Payroll taxes & fees 28,629 9.7% 251,879 13.5%

Total cost of sales 229,006 77.7% 1,575,706 84.7%

Gross margin 65,708 22.3% 284,146 15.3%

OVERHEAD ALLOCATIONS

Filling work orders:

Number of Temporaries ordered 508 3,438

X

Activity rate $48.239 $48.239

24,505 8.3% 165,846 8.9%

Hiring temporary employees:

Number of applicants 3,380 3,380

X

% of orders to total 12.9% 87.1%

Applicants by channel 436 2,944

X

Activity rate $26.571 $26.571

11,585 3.9% 78,225 4.2%

Processing payroll/billing:

Hours worked 32,890 213,480

X

Activity rate $0.1655 $0.1655

5,443 1.8% 35,331 1.9%

Total overhead allocation 41,534 14.1% 279,402 15.0%

Net profit $24,174 8.2% $4,744 0.3%

TOTAL %

Sales $2,154,566 100.0%

Cost of Sales

Wages-Temporary employees 1,524,204 70.7%

Payroll taxes & fees 280,508 13.0%

Total cost of sales 1,804,712 83.8%

Gross margin 349,854 16.2%

OVERHEAD ALLOCATIONS

Filling work orders:

Number of Temporaries ordered 3,946

X

Activity rate $48.239

190,351 8.8%

Hiring temporary employees:

Number of applicants 3,380

X

% of orders to total 100%

Applicants by channel 3,380

X

Activity rate $26.571

89,810 4.2%

Processing payroll/billing:

Hours worked 246,370

X

Activity rate $0.1655

40,774 1.9%

Total overhead allocation 320,936 14.9%

Net profit $28,918 1.3%

Table 4: Temp Employment Company, Inc.

Profitability Analysis by Industrial Channel Classes

LOW WC AVERAGE WC

RATES % RATES %

Sales $369,911 100.0% $1,280,184 100.0%

Cost of Sales

Wages-Temporary employees 260,019 70.3% 909,247 71.0%

Payroll taxes & fees 43,284 11.7% 174,037 13.6%

Total cost of sales 303,303 82.0% 1,083,284 84.6%

Gross margin $66,608 18.0% $196,900 15.4%

OVERHEAD ALLOCATIONS

Filling work orders:

Number of Temporaries ordered 554 2,719

X

Activity rate $48.239 $48.239

26,724 7.2% 131,162 10.2%

Hiring temporary employees:

Number of applicants 2,944 2,944

X

% of orders to total 16.1% 79.1%

Applicants by channel 474 2,329

X

Activity rate $26.571 $26.571

12,594 3.4% 61,876 4.8%

Processing payroll/billing:

Hours worked 45,140 146,023

X

Activity rate $0.1655 $0.1655

7,471 2.0% 24,167 1.9%

Total overhead allocation 46,789 12.6% 217,205 17.0%

Net profit $19,819 5.4% $(20,305) -1.6%

HIGH WC

RATES % TOTAL %

Sales $209,757 100.0% $1,859,852 100.0%

Cost of Sales

Wages-Temporary employees 154,561 73.7% 1,323,827 71.2%

Payroll taxes & fees 34,558 16.5% 251,879 13.5%

Total cost of sales 189,119 90.2% 1,575,706 84.7%

Gross margin $20,638 9.8% $284,146 15.3%

OVERHEAD ALLOCATIONS

Filling work orders:

Number of Temporaries ordered 165 3,438

X

Activity rate $48.239 $48.239

7,959 3.8% 165,846 8.9%

Hiring temporary employees:

Number of applicants 2,944 2,944

X

% of orders to total 4.8% 100%

Applicants by channel 141 2,944

X

Activity rate $26.571 $26.571

3,755 1.8% 78,225 4.2%

Processing payroll/billing:

Hours worked 22,317 213,480

X

Activity rate $0.1655 $0.1655

3,693 1.8% 35,331 1.9%

Total overhead allocation 15,408 7.3% 279,402 15.0%

Net profit $5,230 2.5% $4,744 0.3%

Table 5: Temp Employment Company, Inc.

Profitability Analysis by Selected Customers

CHEMICAL TRAILER

COMPANY % MANUFACTURER

Sales $466,733 100.0% $145,764

Cost of Sales

Wages-Temporary employees 341,620 73.2% 110,473

Payroll taxes & fees 65,366 14.0% 24,350

Total cost of sales 406,986 87.2% 134,823

Gross margin $59,747 12.8% $10,941

OVERHEAD ALLOCATIONS

Filling work orders:

Number of Temporaries ordered 86 56

X

Activity rate $48.239 $48.239

4,149 0.9% 2,701

Hiring temporary employees:

Number of applicants 2,944 2,944

X

% of orders to total 2.5% 1.6%

Applicants by channel 74 47

X

Activity rate $26.571 $26.571

1,954 0.4% 1,250

Processing payroll/billing:

Hours worked 47,371 15,113

X

Activity rate $0.1655 $0.1655

7,840 1.7% 2,501

Total overhead allocation 13,942 3.0% 6,453

Net profit $45,805 9.8% $4,488

NEWSPAPER

% PUBLISHER %

Sales 100.0% $122,604 100.0%

Cost of Sales

Wages-Temporary employees 75.8% 92,205 75.2%

Payroll taxes & fees 16.7% 18,621 15.2%

Total cost of sales 92.5% 110,826 90.4%

Gross margin 7.5% $11,778 9.6%

OVERHEAD ALLOCATIONS

Filling work orders:

Number of Temporaries ordered 928

X

Activity rate $48.239

1.9% 44,766 36.5%

Hiring temporary employees:

Number of applicants 2,944

X

% of orders to total 27.0%

Applicants by channel 794

X

Activity rate $26.571

0.9% 21,099 17.2%

Processing payroll/billing:

Hours worked 13,000

X

Activity rate $0.1655

1.7% 2,152 1.8%

Total overhead allocation 4.4% 68,017 55.5%

Net profit 3.1% $(56,239) -45.9%

FOOD

PROCESSOR %

Sales $167,327 100.0%

Cost of Sales

Wages-Temporary employees 120,451 72.0%

Payroll taxes & fees 23,411 14.0%

Total cost of sales 143,862 86.0%

Gross margin $23,465 14.0%

OVERHEAD ALLOCATIONS

Filling work orders:

Number of Temporaries ordered 332

X

Activity rate $48.239

16,015 9.6%

Hiring temporary employees:

Number of applicants 2,944

X

% of orders to total 9.7%

Applicants by channel 285

X

Activity rate $26.571

7,580 4.5%

Processing payroll/billing:

Hours worked 22,762

X

Activity rate $0.1655

3,767 2.3%

Total overhead allocation 27,363 16.4%

Net profit $3,898 -2.3%

(1) J. N. Sheth, R. S. Sisodia, and A. Sharma, “The Antecedents and Consequences of Customer-Centric Marketing,” Journal of the Academy of Marketing Science, Vol. 28, No. 1, 2000, pp. 55-66.

DeWayne L. Searcy, Ph.D., CMA, CPA, CIA, is an assistant professor in the department of accounting at the University of Miami in Coral Gables, Fla. His research interests are supply chain management, lean enterprises, and continuous auditing. He can be reached at (305) 284-4821 or dsearcy@miami.edu.

COPYRIGHT 2004 Institute of Management Accountants

COPYRIGHT 2004 Gale Group