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 25 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: 65 minutes.
Hiring: 80 minutes.
Assessment: 115 minutes.
Separation Processing: 110 minutes.
Employees in Personnel work 55-hour weeks with four weeks for vacation. Of the 55 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 $992,000. During the year, Personnel conducted 3,200 interviews, made 775 hires, made 7,000 assessments, and had 350 separations.
Required:
a. What is the cost per minute for activities in Personnel? (Round your answer to 2 decimal places.)
b. What is the cost of interviewing and hiring one employee? (Round your intermediate calculations and final answer to 2 decimal places.)
c. How many minutes of unused capacity did Personnel have for the year?
d. What was the cost of the unused capacity in Personnel? (Round your intermediate calculations to 2 decimal places and round your final answer to the nearest whole dollar.)
SOLUTION:
A)COST PER MINUTE FOR ACTIVITIES IN PERSONNEL= 0.27 per minute
Cost /total minutes=992000/3600000 =0.27
B)COST OF INTERVIEWING ONE EMPLOYEE=65*0.27 = $17.55
COST OF HIRING ONE EMPLOYEE=80*0.27 = $21.6
C)MINUTES OF UNUSED CAPACITY =3600000-1113500 = $2486500
D)COST OF THE UNUSED CAPACITY IN PERSONNEL= 2486500*0.27 = $671355
ACTIVITY | TIME REQUIRED | TOTAL($) |
INTERVIEWING | 65 minutes*3200 interviews | 208000 |
HIRING | 80 minutes*775 hires | 62000 |
ASSESSMENT | 115 minutes* 7000 assessments | 805000 |
SEPARATION PROCESSING | 110 minutes*350 separations | 38500 |
$1113500 |
Number of minute available in a year for personnel department= 25 employees*48 weeks*(55-5)hours per week*60 minutes per hour
=25*48*50*60
=3600000
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