Atlantic Resorts Operates a Centralized Call Center for the Reservation

question 77

Essay

Atlantic Resorts operates a centralized call center for the reservation needs of its time-share units. Costs associated with use of the center are charged to the time-share group (Luxury, Standard, and Budget) where a reservation is made on the basis of time spent on a call. Due to recent increased competition in the time-share business, the company has decided that it is necessary to more accurately allocate its costs to price its services competitively and profitably. During the current period, the use of the call center for each group was as follows (in thousands of seconds for time usage and in number of reservations):
$$\begin{array} { | l | r | r | } \hline \text { Division } & { \text { Time Usage } } & \text { Number of Reservations } \\\hline \text { Luxury } & 500,000 & 50,000 \\\hline \text { Standard } & 2,000,000 & 300,000 \\\hline \text { Budget } & 1,500,000 & 250,000 \\\hline\end{array}$$
During this period, the cost of the computer center amounted to $1,760,000 for personnel and $1,240,000 for equipment and other costs.
Required:
Determine the allocation to each of the divisions using: (Round all decimals to three places.)
a. a single rate based on time used.
b. multiple rates based on time used (for personnel costs) and number of reservations (for equipment and other cost).

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Definitions:

Lipids

A diverse group of organic compounds that are insoluble in water but soluble in organic solvents, playing critical roles in cell structure, energy storage, and signaling.

Fat-Soluble Vitamins

Vitamins, such as A, D, E, and K, that can be stored in the body's fatty tissue and liver.

White Blood Cell Count

A test measuring the number of white blood cells in the blood, indicating the body's immune system activity.

Below Normal

Indicative of measurements or conditions that are less than the typical or expected standard.