The manager of the Personnel Department at City Enterprises has been reading abo
ID: 2597693 • Letter: T
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 13 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: 53 minutes.
Hiring: 68 minutes.
Assessment: 91 minutes.
Separation Processing: 98 minutes.
Employees in Personnel work 43-hour weeks with four weeks for vacation. Of the 43 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 $980,000. During the year, Personnel conducted 2,000 interviews, made 535 hires, made 4,600 assessments, and had 290 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 answers 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.)
Explanation / Answer
Solution:
Effective working hours of personnel per week = 43-5 = 38 hours
Total working hours for the year per personnel = 38*48 = 1824 hours
Total working minutes for the year per personnel = 1824*60 = 109440 minutes
Total working minutes for personnel department = 109440*13 = 1422720 minutes
Annual cost of personnel department = $980,000
Cost per minute for activities in Personnel = 980000/1422720 = $0.69 per minute
Cost of interviewing one employee = 53 * 0.69 = $36.57
Cost of Hiring one employee = 68 * 0.69 = $46.92
Total Time consumed in interviews = 2000*53 = 106000 minutes
Total Time consumed in Hiring = 535*68 = 36380 minutes
Total time consumed in assessments = 4600*91 = 418600 minutes
Total Time consumed in separation = 290 * 98 = 28420 minutes
Total time consumed for personnel department in activity = 106000 + 36380 + 418600 + 28420
= 589400 minutes
Unused capacity of personnel department = 1422720 – 589400 = 833320 minutes
Cost of unused capacity = 833320 * 0.69 = $574,990.80
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.