Doug Terry, one of the two account supervisors in your group, walks into your office one fine morning and proceeds to tell you that the Marketing Director for High West Financial Services, one of the clients in your account group, is questioning the agencys billing practices. Specifically, the client is questioning the hourly charge-out rates for employees working on the account under the agreed contract/agency services agreement. As the Group Account Director on the High West business, you - along with the agencys CFO - handled the contract negotiations with High West that resulted in the approved contract/agency services agreement that sets forth and contains the methodology for calculating agency time of staff on the account in an Agency Fee Addendum. Per the contract, the client has agreed that the agency will charge out time-of-staff on the High West account using a multiplier of 2.50 on employee direct salaries to cover employee direct salaries, benefits, overhead and mark-up of 25% (on direct employee costs). The formula for the contractually agreed fully allocated employee cost charge-out rate on High West follows: Direct Salary + Benefits (20%) + Overhead (Direct Salary x 1.0) +25% (direct costs) = Employee Hourly 1800 Annual Hours Charge Out Rate Doug proceeds to tell you that the agency Account Supervisor (AS) on the High West account regularly plays golf with the clients Advertising Services Manager, and at some point, inadvertently told her that she makes $62,000 working at the agency. And while this all seemed very innocent and innocuous at the time, the client files this information away and quietly begins to work on an independent analysis of the agency charge-out rates on High West. What could possibly go wrong? Using the salary information provided, the Advertising Services Manager computes that if the AS works 40 hours per week, that the ASs time on the High West Financial account would total 2,080 hours per year. Doing the math using the $62,000 salary information she obtained purely through happenstance from the AS, the High West Advertising Services Manager computes that the Account Supervisors charge out rate is $29.80/hour. The Advertising Services Manager goes back and checks the math against the contractual charge out rate of $86.11 as outlined in the Agency Fee Addendum to the and arrives at the conclusion that the agency is overcharging High West $56.31/hour for the Account Supervisors time on the account. The Advertising Services Manager is recommending that High West conduct a full audit of the agencys charge-out rates. The Marketing Director, armed with this information, and the Marketing immediately calls Doug Terry to set up a meeting the following morning at 9:00 a.m. and wants a full and transparent review of the agencys billing practices and charge out rates for employees on the High West account. THE ON THE FLY 3@ QUESTION Is the Advertising Service Managers assertion regarding the agencys over charging on time-of-staff on the High West account correct? Please submit your On The Fly #2 assignment using the following answer sheet The assignment is due Tuesday, October 23 @ 5:00pm EDT On The Fly #2: Gotcha! The only ADV 330 assignment with a right / wrong answer its all or nothing on this one. STUDENT NAME: THE BIG QUESTION Is the Advertising Service Managers assertion regarding the agencys over charge correct? YES _____ NO _____ The rationale behind your answer (in 100 words or less):