Question

Pacific Hotels operates a centralized call center for the reservation needs of its hotels. Costs associated with use of the center are charged to the hotel group (luxury, resort, standard, and budget) based on the length of time of calls made (time usage). Idle time of the reservation agents, time spent on calls in which no reservation is made, and the fixed cost of the equipment are allocated based ent increased competition in the hotel industry, the company has decided that it is necessary to better allocate its costs in order to price its services competitively and profitably. During the most recent period for which data are available, the use of the call center for each hotel group was as follows. Number of Reservations (thousands) Time Usage (thousands of minutes) 260 130 520 390 Division Luxury Resort Standard Budget 98 182 322 798 During this period, the cost of the call center amounted to $810,000 for personnel and $680,000 for equipment and other costs.

Answer 1

+ Pacific Hotels Rog AL single rote based on time used Department Luxury Resort Standard Budget Allocared Cost F298000 149000 5,96000 4,47000 Explanation: TOTO Time Usage: 260 + (30 + 520 + 390 3 torcy Cost 58 10000 T F 680000 = 1300 $14,90,000 Allocated cost Luxury Resort Standard Budget Total Rate 260 1300 = 0.2 130 = 1300 – 0.1 520 - 1300 = 0.4 390 : 1300 - 0.3 $1490000 x 0.2 = 298000 $1490000 X 0.1 = 149000 $1490,000 x 0.4 - 5960ool $1490oo0 x 03= 447000 51490.000 'ReQA2 Department Luxury Resort stondare Allocated cost B 209600 $ 169400 4 80400 $630600 Budget

Department Luxury Resort Standose Budger (A+B) Time allocated Reservation Allocated Allocated To Total Used personal Ratio Eaujemente allocated Ratio cost other cost cosi 0.2 162000 98=1400 -0.01 17600 209600 ol 81000 182 = 1400 -0.13 88400 1 69400 10.4 1324000 322 = 1400= 0.23 156400 480400 0.3 243000 998=1400 -0.57 387600 630600 2.0 810,000 IO $ 680,000 $1490,000 того Explanation () Time used Ratio from deq ACI) (Q Allocated personal cost-C $ 810,000) 5 a 6/ | a) $ 810,000 X $ 8,10,000 X $ 8,10,000 x 8 8, 10,000 X 0. 2 0.1 0.4 0.3 162000 81000 324000 243000 - (3) TOTO NO. Of Reserva Hon = 98 + 182 +322+ 798 = 1400 (4) Allocaled cauipment & other cost ( 8 680,000). 9 61 9 a $ 680,000 X $6,80,000 X $6,80,000 x $ 6,80,000 X 0.07 = 0.13 0.23 - 0.57 - $47600 88400 156400 387600