The activity matrix below shows the budget for the sales orderdepartment of Cognet Inc. Relevant information with regard to theoperation of the sales order department is as follows:
iA team of staff deals with existingcustomers in respect of problems with orders or with prospectivecustomers enquiring about potential orders.
ii The processing of orders requires communication with the production and despatch functions of the company.
iiiThe nature of the business is suchthat there is some despatching of part-orders to customers which helpsreduce stock holding costs and helps customers in their work flowmanagement.
ivSales literature is sent out to existing and prospective customers by means of a monthly mail shot.
Cognet Inc has decided to acquire additional computer software withinternet links in order to improve the effectiveness of the sales orderdepartment. The cost to the company of this initiative is estimated at$230,000 pa.
It is estimated that there will be the following cost and volume changes to activities in the sales order department:
(1)Reduction in overall salaries by 10% per annum, applied to the existing salary apportionments.
(2)Reduction of 60% in the stores/supplies cost in the sales literature activity only.
(3)$20,000 of the computer software cost willbe allocated to the sales literature activity. The balance will beshared by the other activities in proportion to their existing share ofIT costs.
(4)Sundry costs for customer negotiation,processing of orders and implementing despatches will vary in proportionto the number of units of each activity. Sundry costs for salesliterature and general administration will be unchanged.

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