Market Makers Inc. (MMI) provides a range of services to itsretail clients—customer service for inquiries, order taking, creditchecking for new customers, and a variety of related services. AutoSupermarket (AS) is a large auto dealer that provides financing forthe autos and trucks that it sells. AS has approached MMI to managethe inquiries that come in regarding these loans. AS is notsatisfied with the performance of the call center it currently usesfor handling inquiries on these loans and is considering a changeto MMI. MMI has been asked to estimate the cost of providing theservice for the coming year.
There are two types of loans at AS, one for autos and SUVs andanother for light trucks. The loans for auto and truck buyerstypically have different types of customers and loan terms, so thenature and volume of the inquiries are expected to differ. MMIwould use its own call center to handle the AS engagement. The MMIcall center’s annual costs are as follows:
| | | |
| Call center costs |
| Salaries | $ | 4,233,555 | |
| Utilities | | 2,497,446 | |
| Leasing of facilities | | 1,995,513 | |
| Other expenses | | 820,036 | |
| $ | 9,546,550 | |
|
MMI’s call center is staffed 12 hours per day with 60 call staffalways available. Each staff member has a paid 10-minute break foreach hour worked, and an unpaid 1-hour break for a lunch/dinnerduring each 12-hour shift. Thus, the call center has 12,045,000minutes (11 hr × 50 min × 60 staff × 365 days) available for callsduring the year.
AS and MMI work together to estimate the number of calls andtime required for each call, based on AS’s prior experience withits current call center.
| Inquiries | Total Calls
Answered | | Average
Number of
Minutes/Call | | Total Time
(minutes) |
| Inquire re: rates and terms | | | | | | | | | | |
| Autos | | 80,100 | | | | 6 | | | | 480,600 | |
| Trucks | | 32,100 | | | | 7 | | | | 224,700 | |
| Inquire re: loan application status | | | | | | | | | | |
| Autos | | 45,100 | | | | 5 | | | | 225,500 | |
| Trucks | | 6,760 | | | | 11 | | | | 74,360 | |
| Inquire re: payment status | | | | | | | | | | | |
| Autos | | 39,100 | | | | 3 | | | | 117,300 | |
| Trucks | | 12,100 | | | | 4 | | | | 48,400 | |
| Inquire re: other matters | | | | | | | | | | | |
| Autos | | 29,100 | | | | 11 | | | | 320,100 | |
| Trucks | | 8,510 | | | | 15 | | | | 127,650 | |
| | | | | | | | | | 1,618,610 | |
|
Required:
1. Determine the amount that MMI should propose to charge AS forthe coming year using TDABC, assuming MMI desires a profit of 30%of incurred cost.
2. Suppose that AS wants the proposal broken down by type ofloan (auto, truck). What would the proposal look like now?
