Question

VF is a small accounting firm supporting wealthy individuals in their preparation of annual income tax statements. Every December, VF sends out a short survey to their customers, asking for the information required for preparing the tax statements. Based on 24 years of experience, VF categorizes their cases into the following groups:

• Group 1 (new customers, easy): 15 percent of cases
• Group 2 (new customers, complex): 6 percent of cases
• Group 3 (repeat customers, easy): 55 percent of cases
• Group 4 (repeat customers, complex): 24 percent of cases

Here, “easy” versus “complex” refers to the complexity of the customer’s earning situation.

In order to prepare the income tax statement, VF needs to complete the following set of activities. Processing times (and even which activities need to be carried out) depend on which group a tax statement falls into. All of the following processing times are expressed in minutes per income tax statement.

Group	Filling			Initial Meeting			Preparation			Review by Senior Accountant			Writing
1		20			35			95			20			55
2		40			110			310			50			70
3		20			No meeting			90			5			35
4		40			No meeting			210			25			70

The activities are carried out by the following three persons:

• Administrative support person: filing and writing.
• Senior accountant (who is also the owner): initial meeting, review by senior accountant.
• Junior accountant: preparation.

Assume that all three persons work eight hours per day and 20 days a month. For the following questions, assume the product mix as described above. Assume that there are 60 income tax statements arriving each month.

A.  What is the (implied) utilization of the senior accountant? The junior accountant? The administrative support person? (Round the answers to 3 decimal places.)

Answer 1

Solution

The implied utilization of the employees:

1) Senior Accountant Initial Meeting, Review by senior meeting

Group Initial m Review Total Income Tax statements Total % Total
1 35 20 55 60 (55*60) 3300 15 495(3300*15%)
2 110 50 160 60 (160*60) 9600 6 576
3 - 5 5 60 (5*60) 300 55 165
4 - 25 25    60 (25*60) 1500 24 360

   1596

Senior accountant: 16.6%

1596min/9600min= 0.166

2) Junior Accountant Preparation

Group Preparation   Income Tax statements Total % Total
1 95     60 (95*60) 5700 15 855(5700*15%)
2 310 60     (310*60) 18600 6 1116
3 90      60    (90*60) 5400 55 2970
4 210     60 (210*60) 12600 24 3024

   7965

Junior accountant: 82.9%

7965min/9600min= 0.829

3) Administration support person Filing and writing

Group   Filling Writing Total Income Tax statements Total % Total
1 20 55 75 60 (75*60) 4500 15 675(4500*15%)
2 40 70 110 60 (110*60) 6600 6 396
3 20 35 55 60 (55*60) 3300 55 1815
4 40 70 110 60 (110*60) 6600 24 1584

   4,470

Administration support person: 46.56%

4470min (how many hours he actually works)/ 9600min (his capacity, 60minx8hx20d) = 0.4656

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