At Deutschland Electronics, Product Lines Are Charged for Call Center

question 140

Essay

At Deutschland Electronics, product lines are charged for call center support costs based on sales revenue. Last year's summary of call center operations revealed the following:
Deutschland Electronics currently allocates call center support costs using a rate of 0.5% of sales revenue.
Required:
a. Compute the amount of call center support costs allocated to each product line under the current system.
b. Assume Deutschland decides to use the average call length for information to assign last year's support costs. Does this allocation method seem more appropriate than percentage of sales? Why or why not?
c. Assume Deutschland decides to use the numbers of calls for information and for warranties to assign last year's support costs of $65,000. Compute the amount of call center support costs assigned to each product line under this revised ABC system.
d. Deutschland Electronics assigns bonuses based on departmental profits. How might the Specialty Products manager try to obtain higher profits for next year if support costs are assigned based on the average call length for information?
e. Discuss the barriers for implementing ABC for this call center.

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Definitions:

Fixed-Ratio

A reinforcement schedule wherein a reward is given after a predetermined number of responses have been made.

Pop Quizzes

Unannounced short tests given in a classroom environment to assess understanding or memory of a topic.

Instinctive Drift

The tendency for animals to revert to instinctual behaviors even when being trained to perform tasks that conflict with those instincts.

Biologically Predisposed Behaviors

Actions or reactions that individuals are inclined to perform based on their genetic makeup.