Manual Systems 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 and Standard) where a reservation is made on the basis of time spent on a call. Due to recent increased
competition in the time-share 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):
Division Time Usuage # of reservations
During this period the cost of the computer center amounted to $1220000 for
personnel and $960000 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).