Aubrey is an accountant for Arbor Town, Inc., a tree preservation and removal company. They currently utilize a traditional costing system, and she is trying to determine whether or not they should implement Time-Driven Activity-Based Costing (TDABC). Arbor Town has several customer-centric activities including: initial phone consultation, appointment setting, follow-up, and service calls. Supporting these activities cost Arbor Town $126,500 last year, and Arbor Town has 75,000 minutes within their capacity. Aubrey has compiled the following data:
Arbor Town is wondering whether they are utilizing their capacity to its fullest potential and are hopeful that TDABC will help shed some light on the best way they can proceed.
(If required, round calculations to two decimal places.)
a. What is the cost per transaction for each of the key activities?
b. Using the TDABC rates, calculate the total cost of transactions.
c. When you compare actual costs incurred to operate the activities to the allocated costs, what is the difference and is it over- or underallocated?

Question

Aubrey is an accountant for Arbor Town, Inc., a tree preservation and removal company. They currently utilize a traditional costing system, and she is trying to determine whether or not they should implement Time-Driven Activity-Based Costing (TDABC). Arbor Town has several customer-centric activities including: initial phone consultation, appointment setting, follow-up, and service calls. Supporting these activities cost Arbor Town $126,500 last year, and Arbor Town has 75,000 minutes within their capacity. Aubrey has compiled the following data:
  Arbor Town is wondering whether they are utilizing their capacity to its fullest potential and are hopeful that TDABC will help shed some light on the best way they can proceed.
(If required, round calculations to two decimal places.)
a. What is the cost per transaction for each of the key activities?
b. Using the TDABC rates, calculate the total cost of transactions.
c. When you compare actual costs incurred to operate the activities to the allocated costs, what is the difference and is it over- or underallocated?

Quizplus · Accepted Answer

The Answer of Aubrey is an accountant for Arbor Town, Inc., a tree preservation and removal company. They currently utilize a traditional costing system, and she is trying to determine whether or not they should implement Time-Driven Activity-Based Costing (TDABC). Arbor Town has several customer-centric activities including: initial phone consultation, appointment setting, follow-up, and service calls. Supporting these activities cost Arbor Town $126,500 last year, and Arbor Town has 75,000 minutes within their capacity. Aubrey has compiled the following data:
  Arbor Town is wondering whether they are utilizing their capacity to its fullest potential and are hopeful that TDABC will help shed some light on the best way they can proceed.
(If required, round calculations to two decimal places.)
a. What is the cost per transaction for each of the key activities?
b. Using the TDABC rates, calculate the total cost of transactions.
c. When you compare actual costs incurred to operate the activities to the allocated costs, what is the difference and is it over- or underallocated?

Aubrey Is an Accountant for Arbor Town, Inc