Question

The manager of the Personnel Department at City Enterprises has been reading about time-driven ABC and wants to apply it to her department. She has identified four basic activities her employees spend most of the their time on: Interviewing, Hiring, Assessment, and Separation Processing. The department employs 4 staff who perform these activities. The manager provides the following estimates for the amount of time it takes to complete each of these activities:

• Interviewing: 155 minutes.
• Hiring: 115 minutes.
• Assessment: 185 minutes.
• Separation Processing: 145 minutes.

Employees in Personnel work 40-hour weeks with four weeks for vacation. Of the 40 hours, five are reserved for administrative tasks, training, and so on. The costs of the Personnel Department, including any allocated costs from other staff functions, are $1,028,160. During the year, Personnel conducted 1,310 interviews, made 430 hires, made 5,200 assessments, and had 470 separations.

The manager of the Personnel Department decides that her estimate of the activities might be too simple in two ways. First, the time to interview depends on the level of the position for which a candidate is sought. She estimates that for a candidate at the manager level, the additional interviewing time is 230 minutes. (Personnel Department employees only conduct the initial interview, but they accompany the candidate for interviews by the hiring executive or CEO.) For a candidate at the executive level, the additional time for interviewing is 635 minutes (in addition to the time required for a manager).

The second issue she identified is that the time for separation processing depends on whether the separation is voluntary. She estimates that an involuntary separation requires an additional 455 minutes of personnel time.

Required:

a. What is the total time required for the interviewing activity?

b. What is the total time required for the separation processing activity?

c. What is the cost of interviewing a manager? An executive?

d. What is the cost of a voluntary separation? An involuntary separation?

Answer 1

a. Total time required for interviewing activity:

			(in minutes)
	Normal time	Additional time	Total Time required
- Manager	155	230	385
- Executive	155	635	790

Note: Since the bifurcation of number of interviews of each category (manager & executive) is not specified, total time required for 1310 interviews could not be calculated.

b. Total time required for the separation processing activity:

			(in minutes)
	Normal time	Additional time	Total Time required
Voluntary	145	-	145
Involuntary	145	455	600

Note: Since the bifurcation of number of separations of each category (voluntary & involuntary) is not specified, total time required for 470 separations could not be calculated.

working note

	Cost per minute
a	Total weeks in a year	52
b	Vacation weeks	4
c	working weeks (a-b)	48
d	working hours	40
e	reserved for admin and routine work	5
f	Productive working hours (d-e)	35
g	Total no of hours ( f * 4 employees)	140
h	hours per year (c*g)	6,720
i	Minutes per year (h * 60)	403,200
j	Annual dept cost ($)	1,028,160
k	Cost per minute (j/i) ($)	2.55

c. Cost of interviewing:

	Total time required (minutes)	Cost (per minute)	cost of interviewing (time req * cost per minute)
- Manager	385	2.55	$ 981.75
- Executive	790	2.55	$ 2,014.50

d. Cost of separation:

	Total time required (minutes)	Cost (per minute)	cost of interviewing (time req * cost per minute)
Voluntary	145	2.55	$ 369.75
Involuntary	600	2.55	$ 1,530.00