C. What is the process capacity (Valley Forge Income Tax Advice) VF is a small accounting firm supporting wealthy in- dividuals in their preparation of annual income tax statements. Every December, VF sen 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 fol- lowing groups: * Group 1 (new customers, easy): 15 percent of cases .7 Group 2 (new customers, complex): 5 percent of cases Group 3 (repeat customers, easy): 50 percent of cases Group 4 (repeat customers, complex): 30 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. Activity times (and even which activities need to be carried out) depend on which group a tax statement falls into. All of the following activity times are expressed in minutes per income tax statement. Review by Senior Accountant 20 60 Group FilingnitialPreparation 20 40 20 No meeting 40 No meeting Meeting 30 90 120 300 80 200 Writing 50 80 30 60 30 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 20 days a month. For the fol- lowing questions, assume the product mix as described above. Assume that there are 50 in- come tax statements arriving each month. a. Which of the three persons is the bottleneck? b. What is the (implied) utilization of the senior accountant? The junior accountant? The administrative support person? You have been asked to analyze which of the four product groups is the most profitable. Which factors would influence the answer to this? c. d. How would the process capacity of VF change if a new word processing system would reduce the time to write the income tax statements by 50 percent?
Answer (a):
The Junior Accountant is the bottleneck. Because his role is to prepare all the accounting and tax returns. So he takes the longest time.
Answer (b):
Before calculate the (implied) utilization we need to calculate the how much time requires by each person. The computation are the following:
For Senior Accountant = 15% * (30 + 20) + 5% * (90 + 60) + 50% * (0 + 5) + 30% * (0 + 30)] * 50 = 26.5 * 50 = 1,325 Minutes.
For Junior Accountant = [15% * 120 + 5% * 300 + 50% * 80 + 30% * 200] * 50 = 133 * 50 = 6,650 Minutes.
For Administrative Support = [15% * (20 + 50) + 5% * (40 + 80) + 50% * (20 + 30) + 30% * (40 + 60)] * 50 = 71.50 * 50 = 3,575 Minutes.
The (implied) utilization of the senior accountant = 1,325 / (20 * 8 * 60) = 13.80%
The (implied) utilization of the junior accountant = 6,650 / (20 * 8 * 60) = 69.27%
The (implied) utilization of the administrative support person = 3,575 / (20 * 8 * 60) = 37.24%
Answer (c):
Among the four product group the most profitable group is Group 3 i.e. repeat customer, easy. Because the employee cost is least in this category.
Answer (d):
The capacity of VF does not change due to introduction of the new word process which reduce the time of writing by 50%. In the bottleneck position the junior accountant is present. They are responsible for the preparation. The introduction of the new word process does not make any impact on the preparation. So the process capacity remain same for VF.
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