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:

Technological Advance

The improvement or innovation in technology, which contributes to increased productivity, efficiency, and potentially new products or services.

E-commerce

Buying and selling on the Internet.

Discounters

Retailers or sellers that offer goods and services at lower prices by reducing overhead costs and margins, often leading to high volume sales.

Misery Index

An economic indicator calculated by adding the unemployment rate to the inflation rate, aiming to measure the health of an economy.