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Questions covered in the Solution:
This assignment requires you to apply your knowledge about responsibility centers, cost
drivers, and cost structure (classification and behavior) in the context of four types of
services provided by an information technology organization:
- IT help desk service
- E-Mail Service
- Enterprise systems (e.g., financial, HR, DePaul’s student registration systems )
- Website development service.
Follow these steps in your analysis:
- Define the scope and the financial objective of each service.
- Organize each IT service as a cost or profit center. You may provide some assumptions about the service in your explanation.
- Identify typical cost drivers for each service. Choose one or two appropriate cost drivers. Remember: cost drivers cause variable costs to change. Among many potential cost drivers, which ones are most appropriate?
- Identify 4 or more cost items for each service (cost object). Typical costs items are labor, material (equipment, etc.), overhead (electricity, etc.). You can use exercise #1 in worksheet #1 as a reference, although that example is more specific on focus group sessions. Be specific.
- Identify the cost structure for resources required to deliver each identified service (Direct/Indirect and Fixed/Variable).
- Provide a brief comment to explain any unique perspectives.
Sample of Solution:
Analysis of IT cost structure:
Information Technological organizations are more oriented towards the services rather than the tangible products. However, different business units can operate within an IT organization, which may include revenue centers, cost centers, profit centers and investment centers. All these business units have their own peculiar responsibilities and distinguished costs which eventually dictate their contributions to organizational strategy.
IT Help Desk Service:
Help Desk Service operates in the supportive dimension of the organization, rather than the direct execution of core services. Since Help Desk is responsible for consumers’ satisfaction while providing information and generic support to the client in real-time, it can be realized that IT Help Desk enriches the consumer experiences with the organization and dictates the retention rate of the clients.
Email Service is responsible for the awareness of existing or subscribed clients, about the new additions to the company or the changed connections of operations. Furthermore, email service can cater both the internal and external requisites of the organization. For instance, email service ensures the strategic flow of information within the organization. While also catering the communication demands of external parties.
Enterprise system is effectively an entity-wide software which integrates different processes within an organization while having a centralized database. Furthermore, having a dedicated hardware, an enterprise system is capacitated to integrate different activities taking place within the organization while efficiently allocating resources and solving critical issues of optimization. Since it is a centralized system, procedures of the different business units are strategically integrated to realize ultimate outputs. Furthermore, with the enterprise system, the need for separate transition system for each business unit also diminishes. Enterprise system can integrate discrete dimensions of an organization, ranging from financial resources to employees’ management. Since, it can be realized that what formations of procedures would eventually induce maximal output, through integrated enterprise system, the probability of potential discrepancies diminishes. Moreover, enterprise system also mitigates the wastage of resources, while efficiently allocating the desired resources for every activity.