Question

Saratoga Company manufactures jobs to customer specifications. The company is conducting a time-driven activity-based costing study in its Purchasing Department to better understand how Purchasing Department labor costs are consumed by individual jobs. To aid the study, the company provided the following data regarding its Purchasing Department and three of its many jobs: 16 $ 25,000 Number of employees Average salary per employee Weeks of employment per year Hours worked per week Practical capacity percentage 52 40 85% Requisition Processing Bid Evaluation 45 Inspection Minutes per unit of the activity Job Y Job Z Job X 10 Number of requisitions processed Number of bid evaluations Number of inspections นา mm Now assume that Saratoga Company would like to answer the following "what if" question using its time-driven activity-based costing system: Assuming our estimated activity demands for all jobs in the next period will be as shown below, how will this affect our job costs and our staffing levels within the Purchasing Department? Requisition Processing 10,700 Bid Evaluation 12,550 Activity demands for all jobs Inspection 15,100 Required: 1. Will the revised activity demands affect the total Purchasing Department labor costs assigned to Job X, Job Y, and Job Z? 2. Using the revised activity demands, calculate Saratoga's used capacity in minutes. 3. Using the revised activity demands, calculate Saratoga's unused capacity in minutes. 4. Using the revised activity demands, calculate Saratoga's unused capacity in number of employees. (Round your answer to 2 decimal places.) 5. Based on the revised activity demands, calculate the impact on expenses of matching capacity with demand. (Be sure to round down your potential adjustment in the number of employees to a whole number. Negative amount should be indicated by a minus sign.) 1. 3. Revised activity demands affect total Purchasing Department labor costs assigned to Jobs X, Y and Z? Used capacity in minutes Unused capacity in minutes Unused capacity in number of employees Impact on expenses of matching capacity with demand 5.

Answer 1

Answer with working notes is given below

1 Revised activity estimates affect Total purchasing Dept 2 Used capacity in minutes 3 unused capacity in minutes Unused capacity in number of employees Jimpact on expenses of matching capacity with demand No 1,178,250 519,030 4.89 | $100,000 Working notes: Number of employees Weeks of employment per year hours per week Maximum capacity Practical capacity percentage % Practical capacity Practical capacity in minutes 33,280 (16*52*40) 85% 28,288 (33,280*85%) 1,697,280 (28,288*60) Total Requisition Bid .. Inspection Processing Evaluation 10,700 12,550 15,100 1545 30 160,500 564,750| 453,000 Activity demand for jobs Minutes required per activity Used capacity in minutes Practical capacity in minutes Unused capacity in minutes Per employee practical capacity Unused capacity in number of employees average salary per employee Impact on expenses of matching capacity with demand 1,178,250 A 1,697,280 B 519,030 B-A 106,080 (52*40*85%*60) 4.89 $25,000 $100,000 ($25,000* 4) Note: Employees rounded down to 4