Personnel Planning; TDABC Recent competitive pressures have caused National InsuranceCompany to examine policies regarding personnel planning. As a start, the company has decided toexperiment with and develop a time-driven ABC model for its claims processing center.A study of this support center indicates the following three primary activities: remote processingof customer claims, 0.5 hour; onsite processing of customer claims, 1.0 hour; and updating/maintaining customer records, 0.2 hour. Onsite processing is required for larger claims, while remote processing is done for smaller claims. (For onsite processing, assume—for simplicity—that the claimsprocessors use their own automobiles.) All claims will require that the customers’ records be updated.The claims processing center currently employs three full-time employees. Total annual cost ofthe center (salaries, depreciation, utilities, etc.) is estimated at $255,000. The net amount of availablepersonnel time per year for this department is approximately 5,000 hours.Required1. Why are service organizations, such as the present example, particularly well-suited to apply activitybased costing for cost and resource planning purposes?

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Personnel Planning; TDABC Recent competitive pressures have caused National Insurance
Company to examine policies regarding personnel planning. As a start, the company has decided to
experiment with and develop a time-driven ABC model for its claims processing center.
A study of this support center indicates the following three primary activities: remote processing
of customer claims, 0.5 hour; onsite processing of customer claims, 1.0 hour; and updating/maintaining customer records, 0.2 hour. Onsite processing is required for larger claims, while remote processing is done for smaller claims. (For onsite processing, assume—for simplicity—that the claims
processors use their own automobiles.) All claims will require that the customers’ records be updated.
The claims processing center currently employs three full-time employees. Total annual cost of
the center (salaries, depreciation, utilities, etc.) is estimated at $255,000. The net amount of available
personnel time per year for this department is approximately 5,000 hours.
Required
1. Why are service organizations, such as the present example, particularly well-suited to apply activitybased costing for cost and resource planning purposes?

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