Bayview Manufacturing Company has an accounts receivable department that performs three activities within the department: invoicing...

Bayview Manufacturing Company has an accounts receivable department that performs three activities within the department: invoicing customers, processing customer credit applications, and performing collection activities. During interviews, the employee survey reports that they spend 15 percent of their time invoicing customers, 55 percent of their time processing credit applications, and 30 percent of their time on collection activities. The accounts receivable department employs 10 associates for a total monthly cost of $50,000. Assume each associate works 8 hours per day, 20 days per month, but an estimate of practical capacity is 80 percent. After close observation of the employee’s daily work, managers conclude the following:

Invoicing a Customer:	35 minutes
Processing a Credit Application:	10 minutes
Collection activities:	20 minutes

The estimated monthly quantities of work in the three activities are 300 invoices, 4,000 credit applications, and 1,150 collection calls.

Required:

Under a traditional ABC system, what is the cost of one unit of activity (round to 2 decimal places)? (10pts)

Assuming the practical capacity information, what is the cost per minute of supplying capacity (round to 2 decimal places)? (5pts)

Under time-driven ABC, what are the cost driver rates for each activity? (5 pts)

Expert Solution

Step 1: -Calculating Activity cost driver rate as per traditional ABC System

Step 2: - Calculating Cost per minute of supplying capacity, using practical capacity

Step 3:- Calculating Activity cost driver rate, under Time Driven ABC System.

ekkarill92 answered 2 years ago

You are consulting with the manager of an Accounts Receivable department of a large manufacturing company....

You are consulting with the manager of an Accounts Receivable department of a large manufacturing company. The manager is concerned that some of the customer accounts are not being paid promptly under the current payment terms. The current payment terms specify 14 days for receipt of payment of all bills. Since the manager did not have any hard evidence, you suggested that the manager collect some data that could then be analyzed. Based on your advice, the manager collects a...

EMT plc has a wide range of manufacturing activities, principally within the UK. The company operates...

EMT plc has a wide range of manufacturing activities, principally within the UK. The company operates on the divisionalized basis with each division being responsible for its own manufacturing, sales and marketing, and working capital management. Divisional chief executives are expected to achieve a target 20% return on sales. A disagreement has arisen between two divisions which operate on adjacent sites. The Office Products Division (OPD) has the opportunity to manufacture a printer using a new linear motor which has...

High Inc. has an accounts receivable turnover ratio of 7.3. Low Company has an accounts receivable...

High Inc. has an accounts receivable turnover ratio of 7.3. Low Company has an accounts receivable turnover ratio of 5. Assuming that High and Low have the same sales level, which of the following statements is correct? A. Low Company has (on average) a lower accounts receivable balance than does High. B. Low's average collection period is less than High's. C. High's average collection period is less than Low's. D. High has a higher accounts receivable balance on average than...

The following information is available for the McCain Manufacturing Company for 2020. Accounts receivable, January 1,...

The following information is available for the McCain Manufacturing Company for 2020. Accounts receivable, January 1, 2020 $120,000 Accounts payable, January 1, 2020 ? Raw materials, January 1, 2020 10,000 Work in process, January 1, 2020 25,000 Finished goods, January 1, 2020 75,000 Accounts receivable, December 31, 2020 80,000 Accounts payable, December 31, 2020 200,000 Raw materials, December 31, 2020 ? Work in process, December 31, 2020 60,000 Finished goods, December 31, 2020 50,000 Raw materials used in production 100,000...

At the end of the year, a company has the following accounts receivable and estimates of...

At the end of the year, a company has the following accounts receivable and estimates of uncollectible accounts: 1. Accounts not yet due = $76,000: Estimated uncollectible = 7% 2. Accounts 1-30 days past due =$39,000' estimated uncollectible = 25% 3. accounts more than 30 days past due = $7,000; estimated uncollectible = 45% Record the year-end adjustment for uncollectible accounts, assuming the current balance of the Allowance for Uncollectible accounts is (1,800 (debit) Record the bad debt expense

A company has inventory balance of $24,318, accounts receivable of $9,637, and accounts payable of $14,365....

A company has inventory balance of $24,318, accounts receivable of $9,637, and accounts payable of $14,365. If the credit sales are $183,030 and cost of goods sold are $128,952, what is the company's cash (conversion) cycle in number of days? (Use ending balances and assume 365 days in a year.) A) 36.59 B) 37.61 C) 38.63 D) 39.64 E) 40.66

A company has inventory balance of $24,935, accounts receivable of $9,902, and accounts payable of $14,652....

A company has inventory balance of $24,935, accounts receivable of $9,902, and accounts payable of $14,652. If the credit sales are $186,978 and cost of goods sold are $132,477, what is the company's cash (conversion) cycle in number of days? (Use ending balances and assume 365 days in a year.)

Metlock Company has the following balances in selected accounts on December 31, 2022. Accounts Receivable $...

Metlock Company has the following balances in selected accounts on December 31, 2022. Accounts Receivable $ 0 Accumulated Depreciation—Equipment 0 Equipment 7,840 Interest Payable 0 Notes Payable 11,200 Prepaid Insurance 2,352 Salaries and Wages Payable 0 Supplies 2,744 Unearned Service Revenue 33,600 All the accounts have normal balances. The following information has been gathered at December 31, 2022. 1. Metlock Company borrowed $11,200 by signing a 12%, one-year note on September 1, 2022. Interest will be paid when the note...

In 2020, a company has an accounts receivable of $20,000 for products that were delivered to...

In 2020, a company has an accounts receivable of $20,000 for products that were delivered to the customer in 2020. It will be collected in 2021. The company has a tax rate of 30% and taxable income of $216,000 at the end of 2020. There were no deferred taxes at the beginning of 2020. What is the amount of income tax expense for 2020?

Estimating Uncollectible Accounts and Reporting Accounts Receivable Collins Company analyzes its accounts receivable at December 31,...

Estimating Uncollectible Accounts and Reporting Accounts Receivable Collins Company analyzes its accounts receivable at December 31, and arrives at the aged categories below along with the percentages that are estimated as uncollectible. Age Group Accounts Receivable Estimated Loss % 0-30 days past due $110,000 1% 31-60 days past due 40,000 2 61-120 days past due 27,000 5 121-180 days past due 14,000 10 Over 180 days past due 9,000 25 Total accounts receivable $200,000 The balance of the allowance for...

Question