Question

Stahl Company is conducting a time-driven activity-based costing study in its Shipping Department. To aid the study, the company provided the following data regarding its Shipping Department and the customers served by the department:

Number of employees		30
Average salary per employee	$	30,000
Weeks of employment per year		52
Hours worked per week		40
Practical capacity percentage		85	%
	Line-Item Picking			Packaging	Loading Deliveries
Minutes per unit of the activity		5		15	30
	Customer L			Customer M	Customer N	All Customers
Number of line items picked		250		150	100	350,000
Number of boxes packaged		40		20	22	36,000
Number of deliveries loaded		6		2	10	13,000

Required:

1. Using the customer cost analysis as demonstrated in Exhibit 7A-2 in your textbook, compute the following:

a. The cost per minute of the resource supplied in the Shipping Department.

b. The time-driven activity rate for each of Stahl’s three activities.

c.The total labor costs consumed by Customer L, Customer M, and Customer N.

2. Using the capacity analysis as demonstrated in Exhibit 7A-3 in your textbook, compute the following:

a. The used capacity in minutes.

b. The unused capacity in minutes.

c. The unused capacity in number of employees.

d. The impact on expenses of matching capacity with demand.

1. Using the customer cost analysis as demonstrated in Exhibit 7A-2 in your textbook, compute the following:

a. The cost per minute of the resource supplied in the Shipping Department.
b. The time-driven activity rate for each of Stahl’s three activities.
c. The total labor costs consumed by Customer L, Customer M, and Customer N.

(For all requirements, round your intermediate calculations and final answers to 2 decimal places.)

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	a. Cost per minute of the resource supplied b. Time-driven activity rate: Line-item picking Packaging Loading Deliveries c. Total shipping labor costs assigned to: Customer L Customer M Customer N

• 2. Using the capacity analysis as demonstrated in Exhibit 7A-3 in your textbook, compute the following:
  
  a. The used capacity in minutes.
  b. The unused capacity in minutes.
  c. The unused capacity in number of employees. (Round your answer to 2 decimal places.)
  d. The impact on expenses of matching capacity with demand. (Round down your potential adjustment in the number of employees to a whole number. Negative amounts should be indicated by a minus sign.)

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  	a. Shipping minutes used to meet demand b. Unused capacity in minutes c. Unused capacity in number of employees d. Impact on expenses of matching capacity with demand

Answer 1

Part 1

a.	Cost per minute of the resources supplied	$0.28
b.	Time-driven activity rate
	Line-item packaging	$1.40
	Packaging	$4.20
	Loading deliveries	$8.40
c.	Total shipping labor cost assigned to:
	Customer L	$568.40
	Customer M	$310.80
	Customer N	$316.40

Part 2

a.	Customer service minutes used to meet demand	2680000
b.	Unused capacity in minutes	502400
c.	Unused capacity in number of employees	5
d.	Impact on expenses of matching capacity with demand	$(150000)

Part 1 A

Customer service department:
Number of employees (a)	30
Average salary per employee (b)	30000
Total cost of resources supplied (a) x (b)	$900000
Practical capacity per employee (in minutes) (a) (52*40*85%*60)	106080
Number of employees (b)	30
Practical capacity of resources supplied (in minutes) (a) x (b)	31,82,400
Cost per minute of the resources supplied (900000/3182400)	0.28

Part 1 B

	Line-item packaging	Packaging	Loading deliveries
Minutes per unit of the activity (a)	5	15	30
Cost per minute of the resources supplied (b)	0.28	0.28	0.28
Time-driven activity rate (a) x (b)	$1.40	$4.20	$8.40

Part 1 C

	Customer L	Customer M	Customer N
Number of Line-items picked (a)	250	150	100
Time-driven activity rate (b)	1.40	1.40	1.40
Line-item packaging costs assigned (a) x (b)	350	210	140
Number of boxes packed	40	20	22
Time-driven activity rate (b)	4.20	4.20	4.20
packaging costs assigned (a) x (b)	168	84	92.40
Number of deliveries loaded	6	2	10
Time-driven activity rate (b)	8.40	8.40	8.40
Loading deliveries costs assigned (a) x (b)	50.40	16.80	84
Total customer service costs assigned (line-item packaging cost packaging cost + loading deliveries cost)	$568.40	$310.80	$316.40

Part 2 A

	Line-item packaging	Packaging	Loading deliveries
Customer demand for each activity (a)	350000	36000	13000
Customer service minutes required per unit of each activity (b)	5	15	30
Customer service minutes used to meet demand (a) x (b)	1750000	540000	390000	2680000

Part 2 B

Total customer service minutes available to meet demand (a)	3182400
Customer service minutes used to meet demand (b)	2680000
Unused capacity in minutes (a) - (b)	502400

Part 2 C

Unused capacity in minutes    (a)	502400
Practical capacity per employee (in minutes) (b)	106080
Unused capacity in number of employees (a) / (b)	5

Part 2 D

Potential adjustment in number of employees    (a)	5
Average salary per employee (b)	30000
Impact on expenses of matching capacity with demand (a) * (b)	$(150000)