Question
Marketing Specialists Inc. (MSI) provides a range of services to its retail clients customer service for inquiries, order taking, credit checking for new customers, and
Marketing Specialists Inc. (MSI) provides a range of services to its retail clients customer service for inquiries, order taking, credit checking for new customers, and a variety of related services. Auto Supermarket (AS) is a large auto dealer that provides financing for the autos and trucks that it sells. AS has approached MSI to manage the inquiries that come in regarding these loans. MSI would use its own call center to handle the AS engagement. The MSI call centers annual costs are as follows: Salaries $4,223,555 Utilities 2,387,446 Leasing of facilities 1,983,063 Other expenses 801,036 Total $9,395,100 MSIs call center is staffed 12 hours per day with 60 call staff always available. Each staff has a paid 10-minute break for each hour worked and an unpaid 1-hour break for a lunch/dinner during their 12-hour shift. Thus, the call center has 12,045,000 minutes (11 hours 50 minutes 60 staff 365 days) available for calls during the year. There are four types of customer inquiries that MSI would handle. Each inquiry type and the time per inquiry are as follows: Inquiry Average Number of Minutes per Call Inquiry regarding rates and terms 4.75 Inquiry regarding loan application status 6.75 Inquiry regarding payment status 3.25 Inquiry regarding other matters 12.00 The expected number of customer inquiries of each type are as follows: Inquiry Number of Inquiries Inquiry regarding rates and terms 128,000 Inquiry regarding loan application status 44,250 Inquiry regarding payment status 51,000 Inquiry regarding other matters 37,500 Required a. Calculate the time-drive activity cost rate for each inquiry type. b. Calculate MSIs total cost for the AS contract assuming that the actual number of inquiries is the same as the expected number for each inquiry type. c. Suppose that in addition to the call center engagement outlined above, AS also provides the following annual service to 10 other clients: Client Total Calls Answered Avg. # of Minutes/Call Platinum Regional Bank 432,440 6.0 Healthwise Software Inc 66,788 5.0 Johnson Manufacturing 268,567 4.0 Lesco Online Shopping 341,742 6.0 Babcock Insurance 55,455 5.6 Garcia Electric Supply 1,004,842 3.5 Calculate the unused capacity at MSI assuming that 1) AS does not become a customer, and 2) AS does become a customer.
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