Asked by Martyna T?cza on May 06, 2024
Verified
Offerman Corporation is conducting a time-driven activity-based costing study in its Tech Support Department. The company has provided the following data to aid in that study: On the Customer Cost Analysis report in time-driven activity-based costing, the total cost assigned to Customer Q would be closest to:
A) $0.00
B) $98.40
C) $213.20
D) $114.80
Time-Driven
A term referring to models or systems that are based on the actual time taken to perform activities, often used in activity-based costing and scheduling.
Activity-Based Costing
An accounting method that assigns costs to products or services based on the activities they require, aiming to more accurately reflect the actual costs of production.
Customer Cost Analysis
A method for determining the total cost associated with acquiring and servicing a customer, including direct and indirect expenses.
- Determine the allocation of overhead expenses to products and clients using Activity-Based Costing.
Verified Answer
Total cost assigned = (Total time spent on activities for Customer Q * Cost per minute of each activity) + Additional direct costs for Customer Q.
For Customer Q, the total time spent on activities is:
- Tier 2 support: 126 minutes
- Tier 1 support: 120 minutes
Total time spent on activities = 126 + 120 = 246 minutes
The cost per minute of each activity is as follows:
- Tier 2 support: $0.80
- Tier 1 support: $0.40
Using these values, we can calculate the total cost assigned to Customer Q as follows:
Total cost assigned = (246 minutes * ($0.80 per minute for Tier 2 support + $0.40 per minute for Tier 1 support)) + $37.60 (Additional direct costs for Customer Q)
Total cost assigned = (246 * $1.20) + $37.60 = $295.20
Therefore, the closest answer choice to the total cost assigned to Customer Q is C) $213.20.
Learning Objectives
- Determine the allocation of overhead expenses to products and clients using Activity-Based Costing.
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