Question

The following data is obtained from the general records in the shipping department at Rapid Parcel 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 2 minutes 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 $8,200 per month. Supervisors divide their time evenly among inspecting, processing, and loading activities, and miscellaneous tasks. $2,000 per month general department overhead is allocated to miscellaneous tasks and $4,000 per month to loading, inspecting and processing activities. August will have 24 working days. Rapid Parcel expects to load 12 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.

Answer 1

	Temporary employee hours required:
								Hours	Hours
	Inspecting		1 minute per package		1/60 hour	(24*12*100*1/60)			480
	Processing		30 minutes per truck		30/60 hour	(24*12*30/60)			144
	Loading		2 minute per package		2/60 hour	(24*12*100*2/60)		960
			3 hours per truck			(24*12*3)		864	1824
	Miscellaneous		2 hours per truck			(24*12*2)			576
	Total								3024
	One supervisor is needed for every 1,000 hours of temporary employee labor (rounded up)
	3024 rounded up will provide 4000 hours
	Hence,number of supervisors required=4000/1000=4
	Total cost of supervisor salary=4*8200=$ 32800
	Supervisors divide their time evenly among inspecting, processing, and loading activities, and miscellaneous tasks
	Allocated supervisor salary equally to all activities=32800/4=$ 8200
		Budget:
	Costs:				Inspecting	Processing	Loading	Miscellaneous
	Temporary employee cost				9600	2880	36480	11520
					(480*20)	(144*20)	(1824*20)	(576*20)
	Supervisor salary				8200	8200	8200	8200
	General department overhead				4000	4000	4000	2000
	Total				21800	15080	48680	21720