Answer to Question 1
c
Answer to Question 2
1. and 2. Audit costs in 2012 and 2013 are as follows:
2012 2013
Total Per unit (2)=
(1) 150 Total Per unit (4)=
(3) 178
Consultation labor
35 2.2 hrs. 150; 35 2 hrs. 178 11,550.00 77.00 12,460.00 70.00
Cost of new contacts, 9 215; 7 275 1,935.00 12.90 1,925.00 10.81
Travel costs, 0.55 1,756; 0.65 1,327 965.80 6.44 862.55 4.85
Preparing and filing costs
9.10 1,218; 9.50 1,367 11,083.80 73.89 12,986.50 72.96
Total 25,534.60 170.23 28,234.05 158.62
3. Target cost per audit in 2013 = Cost per audit in 2012 95
= 170.23 0.95 = 161.72
Actual cost per audit in 2013 was 158.62. Hence, Sun Systems did achieve its target cost per audit of 161.72
In spite of rising transportation costs and clerical wages, the company was able to reduce the cost per audit in 2013. This was possible by reducing the number of miles driven per appointment from 11.7 miles (1,756 150) in 2012 to 7.5 miles (1,327 178) in 2013. This could be due to a implementing a better scheduling system to maximize the number of appointments in a given area. Also, the number of clerical hours per audit decreased from 8.12 hours (1,218 150) in 2012 to 7.68 hours (1,367 178) in 2013. This could be due to process improvements in preparing the required forms. There is also a reduction in consultant labor hours and consultation labor cost per audit. Presumably, there is no reduction in customer satisfaction.
4. The challenges Sun Systems may face in achieving their target cost include employee resistance to changes in processes, unexpected increases in the cost of supplies, fuel, etc, and new compliance requirements imposed from the federal and/or state governments that increase clerical time on each audit. To overcome these challenges, Sun Systems managers should encourage employee participation and celebrate small improvements toward achieving the target cost and set cost-cutting targets after taking into account the external environment such as cost of supplies and new compliance requirements. Managers should create a culture where employees are encouraged to continuously improve the energy audit process.