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(Solution) - Original activity based costing and time driven activity based c

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Original activity-based costing and time-driven activity-based costing Garber Company uses a traditional activity-based costing system to assign $600,000 of committed resource costs for customer service on the basis of the following information gathered from interviews with customer service personnel:


Required
(a) Compute the activity cost driver rates using this system.
(b) Suppose instead that Garber uses time-driven ABC to assign the $600,000 of committed resource costs to the three activities. Compute the time-driven activity cost driver rates, assuming 10,000 hours of useful work and the unit time estimates that follow:


(c) Suppose that the quantities of activities this period are 8,000 customer orders, 400 customer complaints, and 450 credit checks. Using the information and activity cost driver rates developed in part b, determine the cost assigned to each of the activities and the estimated hours of unused capacity as well as the associated cost. What actions might managers take after evaluating such information?
(d) Suppose that in the next time period, the quantities of activities change to 8,500 customer orders, 350 customer complaints, and 500 credit checks. Using the information and activity cost driver rates developed in part b, determine the cost assigned to each of the activities and the estimated hours of unused capacity as well as the associated cost.
(e) Explain why the activity cost driver rates computed in part a are different from the rates computed in part b.

 







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This question was answered on: Jul 11, 2017

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