The following data is obtained from the general records in the
shipping department at United Federal Delivery Company for August:
? Inspecting packages prior to placement on truck takes 1 minute
per package. ? Processing paperwork for each shipment (each truck
loaded) takes 30 minutes. ? Loading packages takes 1 minute of
labor per package plus an additional 3 labor hours per truck ?
Miscellaneous tasks take 2 hours per truck. ? Temporary employees
to perform all of the above tasks can be hired for any amount of
hours at a rate of $20 per hour during the summer (no benefits). ?
One supervisor is needed for every 1,000 hours of temporary
employee labor (rounded up). ? Supervisors are paid a flat rate of
$4,100 per month. ? Supervisors divide their time evenly among
inspecting, processing, and loading activities, and miscellaneous
tasks. ? $1,000 per month general department overhead is allocated
to miscellaneous tasks and $2,000 per month to loading, inspecting
and processing activities. August will have 12 working days. United
Federal expects to load 6 trucks per day during August. There are
on average 100 packages per truck. Required – 12 Points Prepare a
budget using the activity-based approach for the costs of
inspecting, processing, loading, and miscellaneous activities
within the shipping department for August.
Calculation of no.of hours worked in the month of August:-
Note:- Assuming temporary labours are employed for the remaining days of the month i.e., 30-12 = 18 days.
Particulars No.of hours worked per day No.of hours worked per month
Inspection 1*100*6 = 600min = 10hrs 10* 18 = 180hrs
Processing 30min*6 = 180min = 3hrs 3*18 = 54hrs
Loading (1*100min*6) +(3*6hrs) = 10hrs+18hrs = 28hrs 28*18 = 504hrs
Miscelleneous 2hrs*6 = 12hrs 12*18 = 216hrs
Total no.of hours worked in the month of August = 180+54+504+216 = 954hrs = 1000hrs(rounded up)
BUDGET USING ACTIVITY BASED APPROACH:-
Particulars Labour cost($) Overhead cost($) Supervisor cost($) Total cost($)
Inspection 3600 2000 4100/4 = 1025 6625
Processing 1080 2000 1025 4105
Loading 10080 2000 1025 13105
Miscelleneous 4320 1000 1025 6345
30180
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