Saratoga Company manufactures jobs to customer specifications. The company is co
ID: 2544992 • Letter: S
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:
Required:
1. Calculate the cost per minute of the resource supplied in the Purchasing Department.
2. Calculate the time-driven activity rate for each of Saratoga’s three activities.
3. Calculate the total purchasing labor costs assigned to Job X, Job Y, and Job Z.
Number of employees 24 Average salary per employee $ 21,000 Weeks of employment per year 52 Hours worked per week 40 Practical capacity percentage 85 % Requisition Processing Bid Evaluation Inspection Minutes per unit of the activity 15 45 30 Job X Job Y Job Z Number of requisitions processed 6 3 2 Number of bid evaluations 4 3 5 Number of inspections 7 3 7Explanation / Answer
1) Total employee cost = 21000*24 = 504000 Total minutes available = 24*52*40*60 = 2995200 Practical capacity = 2995200*85% = 2545920 Cost per minute of resource supplied in the Purchasing Department $ 0.20 2) Time driven activity rate: Requisition Processing Bid Evaluation Inspection Minutes per unit of the activity 15 45 30 Activity rate $ 2.97 $ 8.91 $ 5.94 3) Purchasing labor costs assigned to Jobs: Job X Job Y Job Z Number of requisitions processed 6 3 2 Number of bid evaluations 4 3 5 Number of inspections 7 3 7 Labor costs assigned: Processing of requisitions $ 17.82 $ 8.91 $ 5.94 Bid evaluations $ 35.64 $ 26.73 $ 44.55 Inspections $ 41.58 $ 17.82 $ 41.58 Total purchasing labor costs assigned $ 95.04 $ 53.46 $ 92.07
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