Marketing Specialists Inc. (MSI) provides a range of services to its retail clientscustomer service for inquiries, ordering

Question:

Marketing Specialists Inc. (MSI) provides a range of services to its retail clients—customer service for inquiries, ordering 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 MIS to manage the inquiries that come in regarding these loans. AS is not satisfied with the performance of the call center it currently uses for handling inquiries on these loans and is considering a change to MSI. MSI has been asked to estimate the cost of providing the service for the coming year. There are two types of loans at AS, one for autos and SUVs and another for light trucks. The loans for auto and truck buyers typically have different types of customers and loan terms, so the nature and volume of the inquiries are expected to differ. MSI would use its own call center to handle the AS engagement. The MSI call center’s annual costs are as follows:

Call Center Costs
Salaries	$4,223,555
Utilities	$2,387,446
Leasing of Facilities	$1,983,063
Other Expenses	$801,036
	$9,395,100

MSI’s 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 hrs. x 50 min. x 60 staff x 365 days) available for calls during the year. AS and MSI work together to estimate the number of calls and time required for each call, based on AS’s prior experience with its current call center.

Practical Capacity 12,045,000

	Total Calls Answered	Avg. No. of Minutes/Call	Total Time (minutes)
Inquiries	Total Calls Answered	Avg. No. of Minutes/Call	Total Time (minutes)
Inquire re: Rates and Terms
Autos	96,000	4	384,000
Trucks	32,000	7	224,000
Inquire re: Loan App Status
Autos	37,500	6	225,000
Trucks	6,750	11	74,250
Inquire re: Payment Status
Autos	39,000	3	117,000
Trucks	12,000	4	48,000
Inquire re: Other Matter
Autos	29,000	11	319,000
Trucks	8,500	15	127,500
Total			1,518,750

Required

1. Determine the amount that MSI should propose to charge AS for the coming year using TDABC, assuming MSI desired a profit of 25 percent of incurred cost.

2. Suppose that AS wants the proposal broken down by type of loan (auto, truck). What would the proposal look likenow?

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