Boise Cascade Co. Case Study

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1.Is Boise Cascade Corporation CDPS a profit center?
Boise Cascade's Corporate Data Processing Services (CDPS) is considered a profit centre. A profit center is a business unit that is treated as a distinct unit within an organization, where expenses and revenues are calculated separately in order for profitability to be determined. CDPS was a division of the Corporate Information Services department within Boise Cascade Corporation, which was responsible for running the mainframe computer and all data processing support within the company, with no external customers. It had its own distinct operating and capital budgets, which were $8.3 million and $4.8 million respectively in 1991. CDPS also reported their own growth and profit independent of the greater organization. The department experienced an annual growth rate to 40% in use of machine resources, independent of growth of the Boise Cascade Corporation. Assume that the CDPS organizational entity will continue to provide basically the same services it has been providing. Evaluate the rest of Boise Cascade's system for controlling data processing support and costs. Comment specifically on the responsibility center structure. Each division of Boise Cascade employed its own programmers and had its own capital budget for the purchase of computer hardware. Some divisions, such as the Office Products and Timber and Wood Products Divisions used only a limited amount of CDPS services, while other groups, such as human resource or corporate finance had no capital budgets and heavily relied on CDPS for computer service. Usage of the mainframe computer within the organization shifted dramatically from batch processing to on-line jobs in 1991, which necessitated work to be primarily done during regular working hours. Users are billed monthly for the usage costs of each resource, plus a mark-up of 22%, it was designed to provide a pre-tax return on PROTC.

The reasons why CDPS billed for the use of computer services...
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