HUMAN RESOURCE DECISIONS 149
attributable to specific contracts) and fixed elements (administration and supervi-
sion). DMC also incurs fixed costs, the main items being for building occupancy (a
charge made by the parent company based on floor area occupied) and the lease
of computer equipment. As these costs follow staffing levels that relate to specific
contracts, they can be allocated with a reasonable degree of accuracy.
DMC’s budget (based on anticipated activity levels and standard costs) is shown
in Table 10.4. As a result of declining retail sales the demand for transactions has
fallen, but because of uncertainty in DMC about how long this downturn will last,
it has only been able to reduce its variable labour cost by ending the contracts of
a small number of temporary staff. DMC’s actual results for the same period are
shown in Table 10.5.
Table 10.4 DMC budget
(In £’000) Contract 1 Contract 2 Contract 3 Total
Budgeted number of transactions 10,000 15,000 25,000 50,000
Fee per transaction £1.00 £0.85 £0.70
Budgeted transaction income 10,000 12,750 17,500 40,250
Fixed monthly fee 5,000 7,500 12,000 24,500
Total budgeted income 15,000 20,250 29,500 64,750
Variable labour costs 4,000 6,000 9,000 19,000
Contribution 11,000 14,250 20,500 45,750
Fixed labour costs 3,000 2,000 2,000 7,000
Occupancy costs 5,000 6,000 12,000 23,000
Computer costs 2,500 3,500 5,000 11,000
Budgeted net profit 500 2,750 1,500 4,750
Table 10.5 DMC actual results
(In £’000) Contract 1 Contract 2 Contract 3 Total
Actual number of transactions 9,000 10,500 22,000 41,500
Fee per transaction £1.00 £0.85 £0.70
Actual transaction income 9,000 8,925 15,400 33,325
Fixed monthly fee 5,000 7,500 12,000 24,500
Actual income 14,000 16,425 27,400 57,825
Variable labour costs 3,750 5,000 8,000 16,750
Contribution 10,250 11,425 19,400 41,075
Fixed labour costs 3,000 2,000 2,000 7,000
Occupancy costs 5,000 6,000 12,000 23,000
Computer costs 2,500 3,500 5,000 11,000
Actual net profit/(-loss) − 250 − 75 400 75