Reference no: EM132510229

At Rakes-Progress Electronics, product lines are charged for call center support cots based on sales revenue.

Last year's summary of call center operations revealed the following:

                                                            Surveillance Products                     Specialty Products

Number of calls for information                   1,000 calls                                     4,000 calls

Average call length for information                  3 minutes                                 8 minutes

Number of calls for warranties                     300 calls                                1,200 calls

Average call length for warranties                    7 minutes                              15 minutes

Sales revenue                                          $8,000,000                                $5,000,000

• Rakes-Progress Electronics currently alllocates call center support costs using a rate of 0.5% of sales revenue.

Required

Question A. Compute the amount of call center support costs allocated to each produce line under the current system.

Question B. Assume Rakes-Progress decides to use the number of calls for information and for warranties to assign last year's support costs of $65,000. compute the amount of call center support costs assigned to each product line under this revised system.

Question C. Rakes-Progress assigns bonuses based on departmental profits. How might the Specialty Products manager try to obtain higher profits for next year if support costs are assigned based on the average call length for information? Please describe reasoning for your answer