Question

QUESTION 2

1. 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): 25 percent of cases

   • Group 2 (new customers, complex): 20 percent of cases

   • Group 3 (repeat customers, easy): 30 percent of cases

   • Group 4 (repeat customers, complex): 25 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	Filing	Initial Meeting	Preparation	Senior Accountant Review	Writing
   1	20	30	120	20	50
   2	40	90	300	60	80
   3	20	No	150	5	60
   4	40	No	200	30	60

   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 22 days a month. For the following questions, assume the product mix as described above. Assume that there are 50 income tax statements arriving each month.

e. What is the implied utilization rate for the senior account? (Round your answer to the nearest whole number and ignore the percentage sign. For example, if your answer is 0.45 or 45%, fill in 45; if your answer is 0.76 or 76%, fill in 76.

Answer 1

Solution:

We tabulate the given information as per role (Admin, Sr. Accountant, and Jr. Accountant) and respective Group of activities as shown below:

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In the next step, we use the service mix data to calculate the total customer requests for each Group as follows:

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In the last step, we calculate the actual effort and total available effort of Sr. Accountant (SA) as shown:

Actual Effort by SA in a month = (Total effort by SA in Group 1 * Number of Group 1 projects) + (Total effort by SA in Group 2 * Number of Group 2 projects) + (Total effort by SA in Group 3 * Number of Group 3 projects) + (Total effort by SA in Group 4 * Number of Group 4 projects) = 2575 minutes

Total Available Effort in a month = 22*8*60 = 10560 minutes

Utilization Rate of SA = Actual Effort / Total Available Effort = 2575 / 10560 = 24.38%

The detailed calculation is shown below:

So. the Utilization Rate of Senior Accountant is 24.