Target costs, effect of process-design changes on service costs.

Sun Systems provides energy

audits in residential areas of southern Ohio. The energy audits provide information to homeowners on the
benefits of solar energy. A consultant from Sun Systems educates the homeowner about federal and state
rebates and tax credits available for purchases and installations of solar heating systems. A successful
energy audit results in the homeowner purchasing a solar heating system. Sun Systems does not install
the solar heating system, but arranges for the installation with a local company. Sun Systems completes
all necessary paperwork related to the rebates, tax credits, and financing. The company has identified
three major activities that drive the cost of energy audits: identifying new contacts (that varies with the
number of new contacts); traveling to and between appointments (that varies with the number of miles
driven); and preparing and filing rebates and tax forms (that varies with the number of clerical hours).
Actual costs for each of these activities in 2012 and 2013 are:
2012 2013
Consultant labor cost per hour $35.00 $35.00
Average cost per new contact 9.00 7.00
Travel cost per mile 0.55 0.65
Preparing and filing cost per clerical hour 9.10 9.50Target costs, effect of process-design changes on service
costs. Sun Systems provides energy
audits in residential areas of southern Ohio. The energy audits provide information to homeowners on the
benefits of solar energy. A consultant from Sun Systems educates the homeowner about federal and state
rebates and tax credits available for purchases and installations of solar heating systems. A successful
energy audit results in the homeowner purchasing a solar heating system. Sun Systems does not install
the solar heating system, but arranges for the installation with a local company. Sun Systems completes
all necessary paperwork related to the rebates, tax credits, and financing. The company has identified
three major activities that drive the cost of energy audits: identifying new contacts (that varies with the
number of new contacts); traveling to and between appointments (that varies with the number of miles
driven); and preparing and filing rebates and tax forms (that varies with the number of clerical hours).
Actual costs for each of these activities in 2012 and 2013 are:
2012 2013
Consultant labor cost per hour $35.00 $35.00
Average cost per new contact 9.00 7.00
Travel cost per mile 0.55 0.65
Preparing and filing cost per clerical hour 9.10 9.50