Question

Hollifield Corporation is conducting a time-driven activity-based costing study in its Order Fulfillment Department. The company has provided the following data to aid in that study: Hollifield Corporation Order Fulfillment Department Data Inputs Resource Data: Number of employees 18 Average salary per employee $ 33,300 Weeks of employment per year 50 Minutes available per week (40 hours × 60 minutes) 2,400 Practical capacity percentage 75 % Activity Data: Processing Orders Preparing Deliveries Handling Returns Minutes per unit of the activity 20 26 48 Cost Object Data: All Customers Number of orders processed 22,540 Number of deliveries prepared 15,180 Number of returns handled 1,540 On the Capacity Analysis report in time-driven activity-based costing, the “impact on expenses of matching capacity with demand” would be closest to:

Answer 1

Weeks of employment per year		50
Minutes available per week		2400
Total minutes of employment per year	50*2400	120000
Number of employees		18
Total minutes available	120000*18	2160000
Practical Capacity	2640000*75%	1620000
Average Salary per Employee		$33,300
Employee Cost per Minute ( $33300/120000)		$0.28

Computation of Impact on Expense of matching Capacity
	Order Processed	Deliveried Prepared	Return Handled	Total
Number (a)	22540	15180	1540
Minutes used (b)	20	26	48
Total minutes used (a*b)	450800	623400	73920	1148120
Available minutes				2160000
Diffeerence				1011880
Impact on Expense ( 1011880*0.2775)				$2,80,797

Hence, it would be closest to $280797