H & R Block is one of the largest and oldest service providers. The company was founded by brothers Henry and Richard Bloch in 1955. The company began franchising in 1956 and they went public in 1962. The company employed over 100,000 tax professionals that are trained both within the U.S. and worldwide. The company has prepared more than 550 million tax returns since the business started in 1955. One key important key to the company success is that they have a retail office within 5 miles of most Americans. You are able to do your taxes both in person and on-line because H & R Block offers these services. The tax-payer can chose to walk into an office and work face-to-face with the tax ...view middle of the document...
Typically what would happen in an H & R office includes income tax preparation from the simplest of 1040EZ to the more complex returns that include business/rental, deduction and investment. The tax professionals at H & R are paid an hourly rate base on years of experience with a bonus tied to the amount of tax returns that are filed. Employee will receive a commission on any extra services that the employee is able to sell to his client. Any potential customers will pay H & R Block a fee for their services roughly by the number of pages the customer’s returns produces.
In an article by Kaplan “Time-Driven Activity-Based Costing”, there are two parameters defined in TDABC. That is the cost rate of supplying resources capacity, and the consumption of resource capacity by the activities performs by the resources. (Kaplan, 2009). A time-driven ABC Model enables managers to report their cost on an ongoing basis in a way that reveals both the time spent on the customers and the business’s activities
Let’s compute the overall head costs of a small business of H & R Block, we will assume that the company administrative employee is paid $8.00, a tax professional is paid $20.00, a customer service representative is paid $12.00. To include with the expenses are the monthly rent of $1500 and for supplies $3000 a month. The other expenses are covered by the corporate office. We are looking at a total quarter overhead of $148,860.00
There is one office leader, two office administrator, three customer service representatives, one training administrator and ten tax professionals. Below is the cost to run the office for a quarter of a year. Each of the position will require some downtime with breaks or lost revenue due to unhappy customers, the capacity rate will be set at 70% for all position:
POSITIONS HOURLY RATE/DOLLAR QUARTERLY COST
Office Manager (1) $15.00 $7,200
Office Administrator (2) $ 8.00 $7,680
Customer Service (3) $12.00 $17,280
Tax Professional (10) $20.00 $96,000
Training Admin (1) $15.00 $7,200
Total Salaries $135,360
Total Costs $148,860
The implementing of the ABC system will be for Tax Professionals. Those are employees are paid $20.00 on an average an hour and normal a 40 hour work week. During the busy times the office may need ten professionals to keep up with the work demand. The cost for the professionals for the first quarter will be calculated at $96,000 ($20.00 x 40 hours x 12 weeks x 10 professional). The cost-driver rate base is below:
10 professional working 12 weeks at 40 hour per week = $4,800 hours in a quarter.
Capacity rate = 70%, so actual capacity rate = 3360.
Cost per hour of supplying capacity = 148860/360 = 44.30 hour.
Implementing an ABC System at H & R Block will help them to understand profit and where it is coming from and show them how to grow the business by reducing some services or...