Activity-Based Management ABC Partners is a consulting firm with clients across the nation. Within the company is a travel group that arranges flights and hotel accommodations for it’s over 1,000 consultants, the cost of operating the travel group excluding the costs associated with actual travel like hotel cost and air fare amounts to around $800,000.
In recent times, ABC Partners has conducted the AEM study that has determined the following:
Each consultant takes around 20 business trips per year.
Usually, 30 percent of trips are rescheduled due to conflicts and poor planning.
The travel group employs 14 individuals at $45,000 each to book travel. Additionally, there is a travel manager and the assistant travel manager.
Benchmarking with a ABC Partners' client points out that client incurs $30 cost per completed trip to book travel.
Question 1)
Calculate the cost incurred by ABC Partners compared to the benchmark cost.
ABC Partners is planning a process improvement initiative aimed at reducing scheduling conflicts. What would be the savings if rescheduling could be reduced by 50 percent? Suppose that the only variable cost in travel services is the wages paid to employees who book travel.