Time-Drive Activity-Based Costing (TDABC) in a Call Center Marketing Specialists Inc. (MSI) provides a range of services to its retail clients—customer service for inquiries, ordering 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 MIS 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 MSI. MSI 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. MSI would use its own call center to handle the AS engagement. The MSI call center’s annual costs are as follows:
Call Center Costs |
|
Salaries | $4,223,555 |
Utilities | 2,387,446 |
Leasing of facilities | 1,983,063 |
Other expenses | 801,036 |
| $9,395,100 |
MSI’s call center is staffed 12 hours per day with 60 call staff always available. Each staff has a paid 10-minute break for each hour worked, and an unpaid 1-hour break for a lunch/dinner during their 12-hour shift. Thus, the call center has 12,045,000 minutes (11 hrs. X 50 min. X 60 staff X 365 days) available for calls during the year.
AS and MSI 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.
|
| Total Calls | Average Number | Total Time |
Inquiries |
| Answered | of Minutes/Call | (minutes) |
Inquire re: | rates and terms |
|
|
|
Autos |
| 96,000 | 4 | 384,000 |
Trucks |
| 32,000 | 7 | 224,000 |
Inquire re: | loan application status |
|
|
|
Autos |
| 37,500 | 6 | 225,000 |
Trucks |
| 6,750 | 11 | 74,250 |
Inquire re: | payment status |
|
|
|
Autos |
| 39,000 | 3 | 117,000 |
Trucks |
| 12,000 | 4 | 48,000 |
Inquire re: | other matters |
|
|
|
Autos |
| 29,000 | 11 | 319,000 |
Trucks |
| 8,500 | 15 | 127,500 |
|
|
|
| 1,518,750 |
Required
1. Determine the amount that MSI should propose to charge AS for the coming year using TDABC, assuming MSI desired a profit of 25 percent of incurred cost.
2. Suppose that AS wants the proposal broken down by type of loan (auto, truck). What would the proposal look like now?
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