Ploof Corporation is conducting a time-driven activity-based costing study in its Customer Service Department. The company has provided the following data to aid in that study: On the Capacity Analysis report in time-driven activity-based costing, the "potential adjustment in the number of employees" would be closest to:
A) (3.00) employees
B) (2.00) employees
C) 3.00 employees
D) 2.00 employees

Question

Ploof Corporation is conducting a time-driven activity-based costing study in its Customer Service Department. The company has provided the following data to aid in that study:  On the Capacity Analysis report in time-driven activity-based costing, the "potential adjustment in the number of employees" would be closest to:
A) (3.00) employees 
B) (2.00) employees 
C) 3.00 employees 
D) 2.00 employees

Quizplus · Accepted Answer

The potential adjustment in the number of employees is calculated by dividing the total available capacity hours by the total actual activity hours. In this case, the total available capacity hours are 18,720 (8 hours per day x 22 working days x 85% efficiency x 6 employees) and the total actual activity hours are 26,320. Therefore, the potential adjustment in the number of employees is (18,720/26,320) - 6 = -2.02, which rounds to (2.00) employees. This means that the department could potentially operate with 2 fewer employees without reducing its level of service.

Ploof Corporation Is Conducting a Time-Driven Activity-Based Costing Study in Its