Question

In: Accounting

The manager of the Personnel Department at City Enterprises has been reading about time-driven ABC and...

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: 245 minutes.
  • Hiring: 160 minutes.
  • Assessment: 275 minutes.
  • Separation Processing: 190 minutes.

Employees in Personnel work 49-hour weeks with four weeks for vacation. Of the 49 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 $1,520,640. During the year, Personnel conducted 1,400 interviews, made 475 hires, made 7,000 assessments, and had 650 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 320 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 860 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 680 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? (Round intermediate calculations and final answer to 2 decimal places.)

d. What is the cost of a voluntary separation? An involuntary separation? (Round intermediate calculations and final answer to 2 decimal places.)

Solutions

Expert Solution

Solution:

a)

Normal time Additional time Total time
Manager 245 320 565
Executive 245 860 1,105

b)

Normal time Additional time Total time
Voluntary 190 0 190
Involuntary 190 680 870

c)

Total time required Cost per minute Cost of interviewing
Manager 565 2.88 $1,627.2
Executive 1,105 2.88 $3,149.25

d)

Total time required Cost per minute Cost of interviewing
Voluntary 190 2.88 $547.2
Involuntary 870 2.88 $2,505.6

Working:

Calculation of cost per minute:

Total weeks in a year 52
Vacation weeks 4
working weeks (50 -4) 50
working hours 49
reserved for admin and routine work 5
Productive working hours (49 -5) 44
Total no of hours ( 44 * 4 employees) 176
hours per year (50*176) 8,800
Minutes per year (8,800* 60) 528,000
Annual dept cost $1,520,640
Cost per minute ($1,520,640/528,000) $2.88

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