ACTIVITY BASED COSTING MODEL

Manual PO TransNet PO HDX (EDI) PO

PURCHASE ORDER PURCHASE ORDER PURCHASE ORDER

DISTRIBUTOR COSTS - PO DISTRIBUTOR COSTS - PO DISTRIBUTOR COSTS - PO

Time Faxing Order - 2 minutes $ 1.00 Time Faxing Order - n/a $ - Time Faxing Order - n/a $ -
Time Keying Order - 5 minutes $ 2.50 Time Keying Order - 5 minutes $ 2.50 Time Keying Order - 5 minutes $ 2.50
Cost of Fax - LD rate $ 0.15 Cost of Dialup - LD rate $ 0.20 Cost of Fax - LD rate - n/a $ -
Cost of ded. phone line / order $ 0.38 Cost of ded. phone line / order $ 0.38 Cost of ded. phone line / order - n/a $ -
Monthly mailbox fee - n/a $ - Monthly mailbox fee - n/a $ - Monthly mailbox fee - n/a $ 0.38
Kilocharacter Cost - n/a $ - Kilocharacter Cost - n/a $ - Kilocharacter Cost - 2 kc $ 0.20
Extra system module Cost / order - n/a $ - Extra system module Cost / order - n/a $ - Extra system module Cost / order $ 0.12
Sub-Total / order $ 4.03 Sub-Total / order $ 3.08 Sub-Total / order $ 3.20

DISTRIBUTOR ERRORS - PO DISTRIBUTOR ERRORS - PO DISTRIBUTOR ERRORS - PO

Time Researching error - 20 min. $ 10.00 Time Researching error - 20 min. $ 10.00 Time Researching error - 20 min. $ 10.00
Time Calling to fix - 10 min. $ 5.00 Time Calling to fix - 10 min. $ 5.00 Time Calling to fix - 10 min. $ 5.00
Time Shipping - 10 min. $ 5.00 Time Shipping - 10 min. $ 5.00 Time Shipping - 10 min. $ 5.00
Shipping costs $ 10.00 Shipping costs $ 10.00 Shipping costs $ 10.00
Frequency - 5% of orders Frequency - 1% of orders Frequency - 1% of orders
Sub-Total / order $ 1.50 Sub-Total / order $ 0.30 Sub-Total / order $ 0.30

TOTAL DISTRIBUTOR COST - PO $ 5.53 TOTAL DISTRIBUTOR COST - PO $ 3.38 TOTAL DISTRIBUTOR COST - PO $ 3.50

VENDOR COSTS - PO VENDOR COSTS - PO VENDOR COSTS - PO

Time Sorting Orders - 0.5 minutes $ 0.25 Time Sorting Orders - n/a $ - Time Sorting Orders - n/a $ -
Time Keying Order - 5 minutes $ 2.50 Time Keying Order - n/a $ - Time Keying Order - n/a $ -
Cost receiving order - n/a $ - Cost receiving order - TransNet $ 2.00 Cost receiving order - 2 kc $ 0.20
Sub-Total $ 2.75 Sub-Total $ 2.00 Sub-Total $ 0.20

VENDOR ERRORS - PO VENDOR ERRORS - PO VENDOR ERRORS - PO

Time Reciving Call to fix - 10 min. $ 5.00 Time Reciving Call to fix - 10 min. $ 5.00 Time Reciving Call to fix - 10 min. $ 5.00
Time Re-keying to fix - 5 min. $ 2.50 Time Re-keying to fix - 5 min. $ 2.50 Time Re-keying to fix - 5 min. $ 2.50
Time Receiving/re-stocking - 20 min. $ 5.00 Time Receiving/re-stocking - 20 min. $ 5.00 Time Receiving/re-stocking - 20 min. $ 5.00
Re-Shipping Costs $ 10.00 Re-Shipping Costs $ 10.00 Re-Shipping Costs $ 10.00
Frequency - 5% Frequency - 1% Frequency - 1%
Sub-Total $ 1.13 Sub-Total $ 0.23 Sub-Total $ 0.23

TOTAL VENDOR COST - PO $ 3.88 TOTAL VENDOR COST - PO $ 2.23 TOTAL VENDOR COST - PO $ 0.43

TOTAL PO COST - BOTH PARTNERS $ 9.41 TOTAL PO COST - BOTH PARTNERS $ 5.61 TOTAL PO COST - BOTH PARTNERS $ 3.93
Manual Invoices Manual Invoices HDX (EDI) Invoices

INVOICE INVOICE INVOICE

VENDOR COSTS - INVOICE VENDOR COSTS - INVOICE VENDOR COSTS - INVOICE

Faxed Invoice $ 0.15 Faxed Invoice $ 0.15 Faxed Invoice - n/a $ -
Mailed Invoice $ 0.37 Mailed Invoice $ 0.37 Mailed Invoice - n/a $ -
EDI invoice - KC - n/a $ - EDI invoice - KC - n/a $ - EDI invoice - KC $ 0.20
Sub-Total $ 0.52 Sub-Total $ 0.52 Sub-Total $ 0.20

VENDOR ERRORS - INVOICE VENDOR ERRORS - INVOICE VENDOR ERRORS - INVOICE

Time Researching error - 20 min. $ 10.00 Time Researching error - 20 min. $ 10.00 Time Researching error - 20 min. $ 10.00
Time Calling to fix - 10 min. $ 5.00 Time Calling to fix - 10 min. $ 5.00 Time Calling to fix - 10 min. $ 5.00
Frequency - 5% of orders Frequency - 5% of orders Frequency - 1% of orders
Sub-Total $ 0.75 Sub-Total $ 0.75 Sub-Total $ 0.15

TOTAL VENDOR COST - INVOICE $ 1.27 TOTAL VENDOR COST - INVOICE $ 1.27 TOTAL VENDOR COST - INVOICE $ 0.35

DISTRIBUTOR COSTS - INVOICE DISTRIBUTOR COSTS - INVOICE DISTRIBUTOR COSTS - INVOICE

Time Sorting Invoices - 0.5 minutes $ 0.25 Time Sorting Invoices - 0.5 minutes $ 0.25 Time Sorting Invoices - n/a $ -
Time Keying Invoices - 5 minutes $ 2.50 Time Keying Invoices - 5 minutes $ 2.50 Time Keying Invoices - n/a $ -
Time reconciling and filing - 20 minutes $ 10.00 Time reconciling and filing - 20 minutes $ 10.00 Time reconciling and filing - n/a $ -
Cost of ded. phone line / order $ 0.38 Cost of ded. phone line / order $ 0.38 Cost of ded. phone line / order - n/a $ -
Kilocharacter Cost - n/a $ - Kilocharacter Cost - n/a $ - Kilocharacter Cost $ 0.20
Extra module Cost / order - n/a $ - Extra module Cost / order - n/a $ - Extra module Cost / order $ 0.12
Sub-Total $ 13.13 Sub-Total $ 13.13 Sub-Total $ 0.32

DISTRIBUTOR ERRORS - INVOICE DISTRIBUTOR ERRORS - INVOICE DISTRIBUTOR ERRORS - INVOICE

Time Researching error - 20 min. $ 10.00 Time Researching error - 20 min. $ 10.00 Time Researching error - 20 min. $ 10.00
Time Calling to fix - 10 min. $ 5.00 Time Calling to fix - 10 min. $ 5.00 Time Calling to fix - 10 min. $ 5.00
Frequency - 5% of orders Frequency - 5% of orders Frequency - 1% of orders
Sub-Total $ 0.75 Sub-Total $ 0.75 Sub-Total $ 0.15

TOTAL DISTRIBUTOR COST - INVOICE $ 13.88 TOTAL DISTRIBUTOR COST - INVOICE $ 13.88 TOTAL DISTRIBUTOR COST - INVOICE $ 0.47

TOTAL INVOICE COST - BOTH PARTNERS $ 15.15 TOTAL INVOICE COST - BOTH PARTNERS $ 15.15 TOTAL INVOICE COST - BOTH PARTNERS $ 0.82
2 INVOICES PER ORDER $ 30.30 2 INVOICES PER ORDER $ 30.30 2 INVOICES PER ORDER $ 1.64

DISTRIBUTOR COSTS - FULL CYCLE $ 33.29 DISTRIBUTOR COSTS - FULL CYCLE $ 31.14 DISTRIBUTOR COSTS - FULL CYCLE $ 4.44
VENDOR COSTS - FULL CYCLE $ 6.42 VENDOR COSTS - FULL CYCLE $ 4.77 VENDOR COSTS - FULL CYCLE $ 1.13
GRAND TOTAL COSTS - FULL CYCLE $ 39.71 GRAND TOTAL COSTS - FULL CYCLE $ 35.91 GRAND TOTAL COSTS - FULL CYCLE $ 5.57
Cost for 200 PO's / Branch $ 7,941.00 Cost for 200 PO's / Branch $ 7,181.00 Cost for 200 PO's / Branch $ 1,113.00
Assumptions

Salaried worker makes $50,000/year (including benefits)

40 hour weeks ~ $25/hour (including benefits)
200 purchase orders / month
1 PO or Invoice = 2 kc
2 invoices per purchase order
Vendor faxes and mails invoices
Manual orders are 95% accurate, EDI/Transnet are 99%
HDX Mailbox = $75/month
Phone line = $75/month - dedicated needed for purchasing
200 PO's a month

Factors not included:

Software setup fees - one-time fee
Mailbox setup fees - one-time fee
Hardware costs - computers/faxes - should have regardless
Internet ISP costs - should have regardless
Dedicated fax for purchasing - should have regardless