PROBLEM 6-12. (Appendix) Activity-Based Management Each month, senior managers at Logan's Department Store 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, 2006 Salaries and benefits $63,500 Supplies 1,900 Depreciation of office equipment 1,300 Total $66,700 Megan Capshaw, the new vice president of operations, expressed her dissatisfaction with the report at a meeting with the company president, CFO, and controller. "This report is garbage," she began. "It shows that $63,500 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 suppose 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."

Ed Walters, the controller responded that he'd get to work on ABM studies right away. Two week later, his staff had developed the following information for the HR operation:
Activities in HR Monthly Cost

a. General administration of department Salary of HR head $ 8,500 Salary of assistant to HR head 4,000 Depreciation of equipment 200 Supplies 150 12,850

b. Benefits administration Salary of administrator 6,500 Depreciation of equipment 150 Supplies 300 6,950

c. HR Web site development/maintenance One half-time staff person 2,000 Depreciation of equipment 400 Supplies 150 2,550

d. Operations Salary of 5 clerks who process paperwork related to hiring, retirements, and terminations 12,500 Depreciation of equipment 600 Supplies 450 13,550

e. Training Salary of 6 staff members who train new employees on company policies, operation of cash-registers, etc. 30,000 Depreciation of equipment 550 Supplies 250 Total 30,800 $66,700 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?