(Valley Forge Income Tax Advice) 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 I (new customers, easy): 15 percent of cases
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.
Group Filling Initial meeting Preparation Review by Writing
senior accounting
1 20 30 120 20 50
2 40 90 300 60 80
3 20 no meeting 80 5 30
4 40 no meeting 200 30 60
The activities are carried out by the following three persons:
Administrative support person: fi ling 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 following questions, assume the product mix as described above. Assume that there are 50 income 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?
c. You have been asked to analyze which of the four product groups is the most profitable. Which factors would influence the answer to this?
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?