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: Number of enployees Aver age salary per enployee Veeks of eaploynent per year Hours vorked per week Practical capacity percent age $ 28. 000 52 40 85% Requisition Processing 15 Bid Evaluation 45 Inspection 30 Minutes per unit of the activity Job X 10 Job Y Job Z Number of requisitions processed Number of bid evaluations Number of inspections In addition, assume that Saratoga Company provided the following activity data for all jobs produced during the year: Requisition Processing 6, 500 Bid Evaluation 8. 150 Inspection 9. 500 Activity denands for all jobs Required: 1. Calculate Saratoga's used capacity in minutes. 2. Calculate Saratoga's unused capacity in minutes. 3. Calculate Saratoga's unused capacity in number of employees. (Round your answer to 2 decimal places.) 4. 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 amounts should be indicated by a minus sign.) Used capacity in minutes

Answer 1

Answer-1:

Calculation of Used Capacity in minutes: Inspection Total Requisition Bid Processing Evaluation 6,500 8,150 15 45 97,500 366,750 Customer demand for each activity (a) Customer service minutes required for each unit of activity (b) Customer service minutes used to meet demand (a) (b) 9,500 30 285,000 749,250 |

Total used capacity in minutes = 749,250

Answer-2:

Calculation of Unused Capacity in minutes: Total Customer service minutes available to meet demand (a) Total Customer service minutes used to meet demand (b) Unused capacity in minutes (a) - (b) 954,720 749,250 205,470

Working Notes:

106,080 Practical capacity per employee (in minutes), (a) (52*40*60*85%]| Number of employees (b) Practical capacity of resources supplied (in minutes) (a) (b) 954,720

Answer-3:

Calculation of Unused Capacity in minutes of employees: Unused capacity in minutes (a) Practical capacity per employee (in minutes), (b) Unused capacity in number of employees (a)/(b) 205,470 106,080 1.94