Question

Spillett Corporation is conducting a time-driven activity-based costing study in its Order Fulfillment Department. The company has provided the following data to aid in that study:

Spillett Corporation
Order Fulfillment Department
Data Inputs
Resource Data:
Number of employees		22
Average salary per employee	$	43,860
Weeks of employment per year		50
Minutes available per week (40 hours × 60 minutes)		2,400
Practical capacity percentage		85	%

Activity Data:	Processing Orders	Preparing Deliveries	Handling Returns
Minutes per unit of the activity	18	30	34

Cost Object Data:	All Customers
Number of orders processed	43,840
Number of deliveries prepared	20,780
Number of returns handled	690

On the Capacity Analysis report in time-driven activity-based costing, the “potential adjustment in the number of employees” would be closest to:

On the Capacity Analysis report in time-driven activity-based costing, the “unused capacity in minutes” would be closest to:

Answer 1

Weeks of employment per year		50
Minutes available per week		2400
Total minutes of employment per year	50*2400	120000
Number of employees		22
Total minutes available	120000*22	2640000
Practical Capacity	2640000*85%	2244000
Computation of Unused Capacity
Used Capacity:
	Order Processed	Deliveried Prepared	Return Handled	Total
Number	43480	20780	690
Minutes used	18	30	34
Total minutes used	782640	623400	23460	1429500
Available minutes				2244000
Unused capacity				814500
Unused capacity in minutes would be closest to 814500 minutes
Computation of potential Adjustment in No. of Employees
	Order Processed
Number	43480
Unused Capacity (in Minutes)	814500
Totoal Minute Available (814500/85%)	958235
To Miuted of Empoyement pe year( 50*2400)	120000
No. of Employees unused (958235/120000)	8 Employee
Hence potential adjustement can be made for 8 Employees