Resource Supply and Usage, Special Order, Relevancy Elliott, Inc., has four sala

Question

Resource Supply and Usage, Special Order, Relevancy

Elliott, Inc., has four salaried clerks to process purchase orders. Each clerk is paid a salary of $24,700 and is capable of processing as many as 7,000 purchase orders per year. Each clerk uses a PC and laser printer in processing orders. Time available on each PC system is sufficient to process 7,000 orders per year. The cost of each PC system is $1,250 per year. In addition to the salaries, Elliott spends $28,560 for forms, postage, and other supplies (assuming 28,000 purchase orders are processed). During the year, 27,200 orders were processed.

Required:

1. Compute the total activity availability, and break this into activity usage and unused activity.

2. Calculate the total cost of resources supplied (activity cost), and break this into the cost of activity used and the cost of unused activity. When required, round your answers to the nearest dollar.

Explanation / Answer

1. Activity availability : 28,000

    Activity usage        : 27,200

   Unused activity (28,000 -27,200 ) 8,00/-

2. Activity cost : & 132,360/-

    Total cost of resource supplied:     Salary - 24,700 * 4   = 98,800

                                              PC Cost 1,250 * 4    =   5,000

                                                          forms & Postage         = 28,560

                                                  Total            :                    = 132,360

Cost of activity used: $ 128,578/-

        Cost per activity: Total cost / Total activity = 132,360 / 28,000 = 4.727

      Purchase orders processed: 27,200

     Cost of activity used: 27,200 * 4.727 = 128,578

Cost of unused activity: $ 3,782/-

      Unused activity : 800

     Cost of unused activity = 800* 4.727 =3,782/-

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