Ledonne Corporation is conducting a time-driven activity-based costing study in

Question

Ledonne Corporation is conducting a time-driven activity-based costing study in its Customer Service Department. The company has provided the following data to aid in that study: Ledonne Corporation Customer Service Department Data Inputs Resource Data: Number of employees 16 Average salary per employee $ 41,040 Practical capacity per employee (in minutes) 108,000 Activity Data: Processing Orders Resolving Queries Processing Credit Reviews Minutes per unit of the activity 12 24 42 Cost Object Data: All Customers Number of orders processed 31,320 Number of queries resolved 21,580 Number of credit reviews processed 1,220 On the Capacity Analysis report in time-driven activity-based costing, the “impact on expenses of matching capacity with demand” would be closest to: ($246,240) ($297,540) ($287,280) ($328,320)

Explanation / Answer

Impact on expenses of matching capacity with demand is closest to $297540

Processing orders Resolving queries Processing credit reviews Total Minutes per unit 12 24 42 Units 31320 21580 1220 Total minutes 375840 517920 51240 945000 Total employee minutes 1728000 108000*16 Difference 783000 Employee Cost per minute 0.38 41040/108000 Impact on expense 297540

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