Atlantic Resorts Operates a Centralized Call Center for the Reservation

question 134

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): $$\begin{array} { | l | r | r | } \hline \text { Division } & \text { Time Usage } & \begin{array} { r } \text { Number of } \\\text { Resenations }\end{array} \\\hline \text { Luxury } & 500,000 & 50,000 \\\hline \text { Standard } & 2,000,000 & 300,000 \\\hline \text { Budget } & 1,500,000 & 250,000 \\\hline\end{array}$$
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:

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Scientific Method

A systematic approach to research where the problem is identified, relevant data is gathered, a hypothesis is formulated from this data, and the hypothesis is empirically tested.