Question

Problem 5-46 Time-Driven Activity-Based Costing (TDABC) in a Call Center (LO 5-3, 5-7] Market Makers Inc. ( MMI) provides a range of services to its retail clients-customer service for inquiries, order taking, credit checking for new customers, and a variety of related services. Auto Supermarket (AS) is a large auto dealer that provides financing for the autos and trucks that it sells. AS has approached MMI to manage the inquiries that come in regarding these loans. AS is not satisfied with the performance of the call center it currently uses for handling inquiries on these loans and is considering a change to MMI. MMI has been asked to estimate the cost of providing the service for the coming year. There are two types of loans at AS, one for autos and SUVs and another for light trucks. The loans for auto and truck buyers typically have different types of customers and loan terms, so the nature and volume of the inquiries are expected to differ. MMI would use its own call center to handle the AS engagement. The MMI call center's annual costs are as follows: Call center costs Salaries Utilities Leasing of facilities Other expenses $4,263,555 2,527,446 2,025,513 823,036 $9,639,550 EMMI's call center is staffed 12 hours per day with 60 call staff always available. Each staff member has a paid 10-minute break for each hour worked, and an unpaid 1-hour break for a lunch/dinner during each 12-hour shift. Thus, the call center has 12,045,000 minutes (11 hr x 50 min ~ 60 staff * 365 days) available for calls during the year. AS and MMI work together to estimate the number of calls and time required for each call, based on AS's prior experience with its current call center.

Answer 1

Here is how we are going to solve this.

The total time given here (for AS) is the ACTUAL WORKED

It DOES NOT INCLUDE the PAID BREAK TIME.

In essence it represents the 50 minutes to the actual Hour paid.

So total hours 1,630,190 in essence are 1,630,190 / 5 X 6 = 1,956,228 hours

Total cost incurred = 9,639,550 / 12,045,000 X 1,956,228 = 1,565,559

Markup of 30% = 2,035,227

2.

For autos = 1,151,000 X 6 / 5 = 1,381,200
For Trucks = 479,190 / 5 X 6 = 575,028

Amounts

Autos = 1,105,367
Trucks = 460,192