Accounting- Co-Op Solution

1.Co-Op pulled data from a period of March-May to implement ABC. I think they should’ve used information from a wider range of time. Or maybe even one month from each quarter. There could be different banking trends depending on the time of the year (i.e. Christmas), so to capture these related expenses, they could’ve used more month out of the year. I liked that the ABC team identified key activities from using their own knowledge and conducting interviews, but I also think they should have observed the activities to make sure the list was all inclusive. I think hiring an outside consultant was weakness in this process. Although he may have technical expertise that others within the company do not possess, he will not know how the business operates as well as employees. Also, if the company does not like the ideas offered by the consultant, they will not continue to be implemented after he leaves, therefore wasting the money to employ him. I liked that Co-op hung brown paper and allowed generating ideas through posting sticky notes. I think it encouraged a team effort from all levels of the company.

I do not think Co-op should phase out their sector independent financial advice segment. The reason it is experiencing extreme negative net profits is due to their allocation of infrastructure cost, but we do not know what they based the $263,078 off of. Without more insight into how they allocated these cost, I would recommend keep it since the segments direct profit is only $(52,073). I would advise them to close their pathfinder segment. Its direct profits are pretty low at $160,766 with most of its cost coming from activity cost. When looking into the specific activity cost I noticed inquiry cost are high, at 84,287, showing that customer do not understand how to use this product. It also has many close substitutes that customers can use, so I do not think phasing it out would upset them.

2. Every company has unprofitable customers. Although first thoughts...