Manning Systems is a commercial software vendor that sells billing and other financial software to companies around the globe. Manning operates a centralized call center for customer support calls. Costs associated with use of the center are charged to the division with primary responsibility for the client. There are four geographical divisions: North America (NA), Central and South America (SA), Europe, and Asia-Pacific (APAC). The allocation is based on the length of time of  calls made (Minutes). Idle time of the reservation agents and the fixed cost of the equipment are allocated based on the number of calls received (Calls) from clients in each division. Due to recent increased competition in the commercial software business, Manning has decided that it is necessary to better allocate its costs in order to price its services competitively and profitably. During the most recent period for which data are available, the use of the call center for each division was as follows:

During this period, the cost of the call center amounted to $2,520,000 for personnel and $1,950,000 for equipment and other costs.

Required

a. Determine the allocation to each of the divisions using the following:

1. A single rate based on time used (minutes).

2. Dual rates based on time used (for personnel costs) and number of calls (for equipment and other costs).

b. Write a short report to management explaining whether a single rate or dual rates should be used, and why.

Transcribed Image Text:

Division Asia-Pacific. Central and South America. Europe... North America. Minutes Calls (Thousands) (Thousands) 240 480 960 720 180 144 432 1.044