Question

# The following data is obtained from the general records in the shipping department at Chicago Delivery...

The following data is obtained from the general records in the shipping department at Chicago 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. Chicago company expects to load 6 trucks per day during August.

There are on average 100 packages per truck.

Required:

Prepare a budget using the activity-based approach for the costs of inspecting, processing, loading, and miscellaneous activities within the shipping department for August.

#### Homework Answers

Answer #1

Calculation of Inspecting Time :
Time = 1 min per package
Total Packages = 12 days * 6 Trucks * 100 Packages = 7200 Packages
Total Time = 7200 *1 = 7200 Minutes = 7200 /60 = 120 hrs

Calculatin of Processing Time:
Time = 30 minutes per shipment
Total Shipment = 12 days * 6 trucks = 72 shipments
Total Time = 72*30 min = 2160 minutes = 2160/60 = 36 hrs

Calculation of Loading Time:
Time = 1 minutes per package + 3 hrs per shipment
Total no. of packages = 7200
Total time of packages = 7200 *1 = 7200 minutes = 120 hrs
Total time of shipment = 3 hrs * 72 shipments = 216 hrs
Total time of Loadind = 120 +216 = 336 hrs

Calculation of Miscellaneous Time:
Time = 2 hrs per truck
Total Time = 2 hrs* 6 trucks * 12 days = 144 hrs

Calculation of No. of Supervisors needed:
Total hrs = 120 + 36 +336 + 144 = 636 hrs
One Supervisor required for every 1000 hrs hence only 1 supervisor is needed.

This budget is as per ABC. and Supervisor charges of \$4100 is based on total labour 636 hrs and respective allocation of cost is calculated by dividing 4100/636 * Respective no. of hrs.

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