TELFORD ENGINEERING P/L account: $M'000

Sales 8,000
Costs Production costs
Materials -2,000
Staff costs -1,500
Overheads -300
Distribution costs
Staff costs -600
Other costs -160
Gen Admin costs
Staff costs -900
Other costs -200
Accounting costs -800
Finance costs -100

Net profit 1,440

NOTE 1
Breakdown of total accounting department costs
Amortisation of non-current assets
Accounting admin costs: materials and variable overheads
Accounting staff costs**

Accountancy department staff grades and salary cost breakdown (pre-resignations)

Head of accounting
Fully qualified (FQ)
Part qualified (PQ)
Accounting technicians (T)
Total staff members:
 % $M'000
10 80
20 160
70 560
100 800

Number of staff Average salary ($M'000)

1 70
4 45
5 30
8 20
18 Total salaries:
Total salary by grade ($M'000)
70
180
150
160
560
ROLES AND GRADES WITHIN THE ACCOUNTING DEPARTMENT TEAM (POST-MEXIT BASED RESIGNATIONS)

Function Team Leader Reports

Receivables PQ(A) Lara Petrov No reports
Payables PQ(D) John Smith T3
Credit Control FQ(B) Rafael Sanchez T4 and T5
Payroll T7 No reports
Long-term asset management FQ(C) Robert Stone No reports
Treasury and cash management PQ(C) Philip Russell No reports
ED RESIGNATIONS)
Option A
Retaining accountancy staff in-house, but operating with the reduced workforce
Staff members who resign leading up to MEXIT are not to be replaced, and the company will continue to operate th
The retained accounting staff post-restructure, will be paid at 10% more than their current salaries. To manage their
of the remaining accountancy department staff, due to the need for increased overtime and the costs of hiring temp

Note: The remaining staff left under the restructure Option, after the earlier redundancies, will be as follows:
Head of accounting (unchanged salary) + 2 Fully Qualified (FQ) Accountants + 3 Part Qualified (PQ) Accountants +

Option B
Outsourcing
Telford Engineering has identified a global business services partner off-shore. The annual cost of outsourcing the
of payables, receivables, payroll and credit control. Long-term asset and treasury and cash management will
Outsourcing would take place immediately following MEXIT (in about one year’s time) and annual outsourcing costs
of their current annual salaries. Outsourcing would mean that 40% of the other non-staff accounting departme
The retained skeleton staff, post-outsourcing, will be paid at 20% more than their current salaries.

Note: The remaining staff to be retained under the Outsource Option will be as follows:
Head of Accounting (unchanged salary) + 2 Fully Qualified (FQ) Accountants and one Part Qualified (PQ) Accounta
n-house, but operating with the reduced workforce
MEXIT are not to be replaced, and the company will continue to operate the accountancy function in-house with a reduced staff level.
cture, will be paid at 10% more than their current salaries. To manage their additional responsibilities and to adopt new working practic
t staff, due to the need for increased overtime and the costs of hiring temporary workers to cover peak times.

estructure Option, after the earlier redundancies, will be as follows:

+ 2 Fully Qualified (FQ) Accountants + 3 Part Qualified (PQ) Accountants + 4 Accounting Technicians

al business services partner off-shore. The annual cost of outsourcing the accounting function per annum is forecast to be $292,000. T
redit control. Long-term asset and treasury and cash management will remain in-house.
ly following MEXIT (in about one year’s time) and annual outsourcing costs are estimated to remain constant over time. The total cost
rcing would mean that 40% of the other non-staff accounting department costs could be saved each year.
cing, will be paid at 20% more than their current salaries.

under the Outsource Option will be as follows:

+ 2 Fully Qualified (FQ) Accountants and one Part Qualified (PQ) Accountant
level. Your salary will remain at $70,000 as you were recently appointed.
practices, but an additional 25% will be added to the total payroll costs (after pay rises)

,000. The GBS Company will take over the highly systemised and transactional operations

al cost of making the staff redundant under the outsource option is estimated to be 25%