Question

7. ConcurTM is a cloud-based on-line employee travel and reimbursement system that many companies and universities have adopted. ConcurTM touts itself as a saver of time and money as it allows employees to directly file their expenses on-line. Suppose you have 100 employees who have travel-related expenses. These employees effectively earn $70/hr on average. Concur costs $8/month for each of these users. At the meeting where the adoption of ConcurTM is being proposed it is noted that ConcurTM will also allow your firm to let go of three entry-level workers who spend a total 600 hours/month filing expense reports for the 100 employees and earn $20/hr each for doing so. From an accounting perspective, what are the savings from ConcurTM? What is the economic cost of ConcurTM and is it worth adopting? That is, will ConcurTM raise or lower economic profits?

Answer 1

Currently, I have following costs:

Explicit cost: three worker spends 600 hours/month and charges $20 per hour hence, in all charges 600*20= 12000 $

If Concur is awarded with contract then Concur will charge $8*100 = $8000.

Accounting perspective awarding a contract will save $4000.

Also, explicit costs of three employees like insurance and other benefits can be saved.

Implicit costs like contingency can also be reduced.

Awarding a contract will be profitable economically too.