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Q8.

Great Valley Income Tax Advice

GV is a small accounting firm supporting wealthy individuals in their preparation of annual income tax statements. Every December, GV sends out a short survey to their customers, asking for the information required for preparing the tax statements. Based on 50 years of experience, GV categorizes their cases into the following groups:

Group 1 (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, GV 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.

The activities are carried out by the following three people:

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 people 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.

1.

Which person is the bottleneck?

c. Junior accountant

a. Administrator

b. Senior accountant

2. What is the (implied) utilization of the senior accountant?

3. What is the (implied) utilization of the junior accountant?

4.What is the (implied) utilization of the administrative support person?