1. Strategic Cost Management
Cost Allocation & Organization Behavior
Case : Grove City Broadcasting
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โดย
กลุ่มที่ 1 & 11

2. รายชื่อผู้ร่วมงาน นายทัดพันธุ์ บุณยรัตพันธุ์ 4502010020
นายทัดพันธุ์ บุณยรัตพันธุ์
นางสาวสมจิตต์     พัฒนาการวิจิตร    
นายภาคภูมิ ศรีชำนิ
นายกำพล แจ้งสุทธิวรวัฒน์
นางสาวสุวรรณี    รุ่งเรืองฤทธิ์              
นายกฤษณะ เทศประสิทธิ์
นางสาวศตพร       วานิชทวีวัฒน์        
นายวรเทพ           ปัญญายงค์              
นายวสุ           ปิยวนิชพงษ์              
นายอนันต์ เอกวงศ์วิริยะ
นางสาววราภรณ์   เจียมเจริญ              
นายศราวิทย์         กุลกฤตยาวณิชย์    

3. Grove City Broadcasting
Grove City Broadcasting owns and operates
- Radio station
- Television station
in Grove City.
Both radio station and television station are
- located in the same building
- operated as a separate profit centers with
separate managers.

4. Grove City Broadcasting
Managers of both stations are evaluted performance based on
station profit
Revenue of Both stations comes from
sale of advertising spots
( The price be charged at a standard 30-second ads. based on audience size. )
Expected audience size at a 30-second ads.
- Radio Station : 20,000 listener

5. Sale rate/ each audience
Grove City Broadcasting
Exhibit 1 Total revenue of ads. Spots before allocated Sport Wire Service cost
Station
Audience Size (psn.)
Sale price / a 30-sec ads.
Sale rate/ each audience
Sale ads. / Mth
Total Revenue
Radio
20,000
$ 100
$ .005 / psn.
($ 100/ 20,000)
3,550 ads.
$ 355,000 TV
N/A
$ .008 / psn.
3,200 ads.
$ 320,000
Both radio station and television station are
Subscribing General News Wire

6. Grove City Broadcasting
Sports Wire is more comprehensive and contains more sports stories than the current general news wires
Sports Wire proposes its service to Grove City
Broadcasting
Subscribing one location $ 30,000 / month
Subscribing two locations $ 35,000 / month
with an extra computer terminal and two users
can be on the system at the same time
Managers believed that if use Sports wire can increase audience
Radio station , listeners/ad
TV station viewers /ad

7. Q & A for Grove City Broadcasting
A) If the two managers did not cooperate but rather each made a decision assuming he or she was the sole user of the system, would either buy Sports Wire? Support your answer with detailed calculations.

8. Q & A for Grove City Broadcasting
Exhibit 2 Total revenue increase from using Sport Wire Services
Station
Added Audience Size (psn.)
Sale rate/ audience ($ /psn.)
Sale ads./ Mth
Total Revenue Increase
Radio
1,500
$ .005
3,550 ads.
$ 26,625
(1,500*0.005*3,550) TV
500
$ .008
3,200 ads.
$ 12,800
(500*0.008*3,200)
Assumed still using General News Wire

9. Q & A for Grove City Broadcasting
Both stations revenue increase < $ 30,000
So both stations will not buy Sports Wire services solely.

10. Q & A for Grove City Broadcasting
B) If the owner of Grove city Broadcasting had all the facts available to the two managers, would the owner buy Sports Wire ?
Radio TV
Total Revenue Increase
Revenue /Mth (using Sport Wire Serv.)
$ 26,625
(1,500*0.005*3,550)
$ 12,800
(500*0.008*3,200)
$ 39,425
Serv. Cost/Mth
$ 30,000
(no coperated)
$ 35,000
(coperated)
Net Profit/Loss/Mth
$ (3,375)
$ (17,200)
$ 4,425
The owner of Grove City Broadcasting will buy Sports Wire

11. Q & A for Grove City Broadcasting
C) The costs of the current wire services that Grove City purchase
are allocated to the two stations based on the number of stories
aired each month from the wire services. The owner of Grove City
Broadcasting decides to purchase Sport Wire for Both stations and
to allocate its $ 35,000 cost based on the number of Sports Wire
stories aired each month. During the first month, the radio station
use 826 Sports Wire stories and TV use 574. Allocate the Sports
Wire cost to the radio and TV stations.
D) What is the allocated cost per Sports Wire story in the first
month ?

12. Q & A for Grove City Broadcasting No. of Sport Wire Stories
Exhibit 3 Cost Allocation for Both Stations (using Sport Wire Service)
Station
No. of Sport Wire Stories
Percentage Ratio
Cost Allocation
($./ Mth)
Radio
826
59 %
(826/1400)
$ 20,650
(35,000 * 59 %) TV
574
41 %
(574/1400)
$ 14,350
(35,000 * 41 %)
TOTAL
1,400
100 %
$ 35,000
Allocated cost per Sports Wire story
= $ 25/story ( 35,000 /1,400 )

13. Q & A for Grove City Broadcasting Total Revenue Increase
E) Given the allocation of the Sports Wire cost, what behaviors can
you predict from the radio and TV station managers ?
Exhibit 4 Return after allocation of the Sport Wire cost
Based/Mth
Radio TV
Total Revenue Increase
Revenue
$ 26,625
$ 12,800
$ 39,425
Allocated-Cost
$ 20,650
$ 14,350
$ 35,000
Net Profit/Loss
$ 5,975
$ (1,550)
$ 4,425
Tax 30 %
$ 1,792.50 -

14. Q & A for Grove City Broadcasting
Using Sports Wire Service ;
- Radio station can increase revenue much more than TV station. ( net profit for Radio = $ 5,975/Mth )
Radio station manager would bring many Sports Wire
stories on air to reduce the allocation cost/story.
TV station manager would bring less Sports Wire
stories on aired since the allocation cost may larger
than its revenue. ( also to reduce cost till to the same
revenue value or more if possible )

15. Q & A for Grove City Broadcasting
F) Design an alternative allocation scheme that avoids the problems
identified in (E). Discuss the advantages and disadvantages of
your allocation scheme.
Allocate cost according to their revenue increase
by using revenue increase ratio.

16. Q & A for Grove City Broadcasting Increased Revenue Ratio
Exhibit 5 Cost allocation scheme according to their revenue increase by using increased revenue ratio
Station
Increased Revenue
Increased Revenue Ratio
Cost Allocation
($./ Mth)
Radio
26,625
68 %
(26,625/39,425)
$ 23,800
(35,000 * 68 %) TV
12,800
32 %
(12,800/39,425)
$ 11,200
(35,000 * 32 %)
TOTAL
39,425
100 %
$ 35,000

17. Q & A for Grove City Broadcasting
Advantage
- Allocation based on increased revenue is fair to both parties
- Both Radio & TV station have revenue increased
- As profit center, the managers are satisfied
Disadvantage
- Distort motivation & improvement
- Distort taxation plan to make one lose to exempt
tax or to make the one which has less tax rate,
to have more revenue.

18. Q & A for Grove City Broadcasting Total Revenue Increase
Exhibit 4 Shown Taxation Plan for Both Stations allocated by using increased revenue ratio
Based/Mth
Radio TV
Total Revenue Increase
Revenue
$ 26,625
$ 12,800
$ 39,425
Allocated-Cost
$ 23,800
$ 11,200
$ 35,000
Net Profit/Loss
$ 2,825
$ 1,600
$ 4,425
Tax 30 % $
$ 480
$ 1,327.50

19. Grove City Broadcasting
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