Maryland Hotels Operates a Centralized Call Center for the Reservation

question 140

Essay

Maryland Hotels 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,Resort,Standard,and Budget)where a reservation is made on the basis of time on a call.Idle time of the reservation agents,time spent on calls where no reservation is made,and the fixed cost of the equipment are allocated on the number of reservations made in each group.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): $$\begin{array} { | l | r | r | } \hline \text { Disision } & \text { Time Usage } & \text { Number of Resenrations } \\\hline \text { Luxury } & 750,000 & 50,000 \\\hline \text { Resort } & 1,250,000 & 100,000 \\\hline \text { Standard } & 2,000,000 & 300,000 \\\hline \text { Budget } & 1,500,000 & 250,000 \\\hline\end{array}$$
During this period,the cost of the computer center amounted to $2,410,000 for personnel and $1,240,000 for equipment and other costs.Required:
Determine the allocation to each of the divisions using (you may 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:

Vandalism Damage

Destruction or damage to property that is willfully or maliciously caused, which can result in financial loss for businesses or individuals.

Straight-Line Depreciation

A method of calculating the depreciation of an asset, which assumes the asset will lose an equal amount of value each year over its useful life.

Residual Value

The estimated value that an asset will realize upon its disposal at the end of its useful life, after depreciation.

Estimated Life

Estimated life is the expected duration or lifespan of an asset, often used in calculating depreciation.