Each month, senior managers at Vermont Wireless Technologies review cost reports for the company’s various departments. The report for the human resource (HR) group for April is as follows:

Human Resources

April 2011

Salaries and benefits…………………….......……..          $75,000

Supplies…………………………………….............…..               2,400

Depreciation of office equipment……………..              1,550

Total……………………………..............……………...            $78,950

Jason Fox, the new vice president of operations, expressed his dissatisfaction with the report at a meeting with the company president, CFO, and controller’ This report is garbage,” he began.” it shows that $75,000 is being spent on salaries in HR. but it doesn’t provide any information on what we’re paying for. We need to know the activities of HR and what they cost. How are we supposed to manage the activities without that information? At my previous company, we routinely did activity- based management studies, and they really helped us get a handle on operations and our costs.’

Maxwell Davies, the controller, responded that he’d get to work on ABM studies right away.

Two weeks later, his staff had developed the following information for the HR operation:

Activities in HR                                                Monthly Cost

General administration of department

Salary of HR head ………………………….......…      $10,000

Salary of assistant to HR head………………..          5,000

Depreciation of equipment……………………              300

Supplies…………………………………….........…..               200

                                                                              $15,500

Benefits administration

Salary of administrator…………………………        $ 8,000

Depreciation of equipment……………………..           250

Supplies…………………………………………                      350

                                                                               $ 8,600

HR Web site development/maintenance

One half-time staff person………………………    $ 3,000

Depreciation of equipment……………………...         500

Supplies………………………………………….                    200

                                                                              $ 3,700

Operations

Salary of five clerks who process paperwork related to hiring, 

retirements, terminations………………………… $14,000

Depreciation of equipment………………………..       700

Supplies…………………………………………...                  500

                                                                             $15,200

Training

Salary of six staff members who train new employees on 

company policies…………………………………     $35,000

Depreciation of equipment……………………….      650

Supplies…………………………………………..                 300

                                                                           $35,950

Total……………………………………………….           $78,950

Additional information: The Company has approximately 6,000 employees and annual employee turnover of approximately 15 percent.

Required

Comment on the insights provided by the ABM study to date. Where’s the low-hanging fruit? In other words, what activities appear to be good candidates for further study and significant cost savings?