Seaside Resorts Operates a Centralized Call Center for the Reservation

question 24

Essay

Seaside 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 and Standard) 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):
$$\begin{array} { | l | r | r | } \hline \text { Division } & { \text { Time Usage } } & \text { Number of Reservations } \\\hline \text { Luxury } & 500,000 & 50,000 \\\hline \text { Standard } & 2,000,000 & 300,000 \\\hline\end{array}$$
During this period, the cost of the computer center amounted to $1,220,000 for personnel and $960,000 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:

Physiological

Relates to the functions and activities of living organisms and their parts.

Production Line Method

A manufacturing process in which parts or components of an end product are made in a sequential order, thus enhancing efficiency and productivity.

Empowerment

The process of giving individuals or groups the authority, resources, and confidence to take control of their circumstances and achieve their own goals.

Suggestion Involvement

Active participation in generating and sharing ideas or solutions to contribute to a group or project.