Eugene is the manager for Levy Corp, an HVAC company, and he is debating the implementation of Time-Driven Activity-Based Costing (TDABC). After meeting with management, he realized that the company may not be fully utilizing their available capacity, and he believes this method will shed some light on their current state of affairs. Eugene will begin his analysis with the customer service center. This department stays very busy, and handled the following volume of activities: cold sales calls, 7,490 calls; repeat service calls, 5,806 calls; and customer concerns and complaints calls, 1,300 calls. They incurred $65,000.00 last year to operate these activities. Eugene has performed an analysis and determined the following:
How much total cost would be allocated to these key activities? (If required, round calculations to two decimal places.)
A) $57,148.92
B) $65,000.00
C) $66,404.92
D) $69,325.80

Question

Eugene is the manager for Levy Corp, an HVAC company, and he is debating the implementation of Time-Driven Activity-Based Costing (TDABC). After meeting with management, he realized that the company may not be fully utilizing their available capacity, and he believes this method will shed some light on their current state of affairs. Eugene will begin his analysis with the customer service center. This department stays very busy, and handled the following volume of activities: cold sales calls, 7,490 calls; repeat service calls, 5,806 calls; and customer concerns and complaints calls, 1,300 calls. They incurred $65,000.00 last year to operate these activities. Eugene has performed an analysis and determined the following:
 How much total cost would be allocated to these key activities? (If required, round calculations to two decimal places.)
A) $57,148.92 
B) $65,000.00 
C) $66,404.92 
D) $69,325.80

Quizplus · Accepted Answer

This question has provided the rate for supplying an activity so the first step needed would be to calculate the cost per transaction. Cold sales calls would be $0.89 per minute times 4.5 minutes or $4.01 per call. Repeat service calls would be $0.89 per minute times 5.25 minutes or $4.67 per call. Customer concerns/complaints calls would be $0.89 per minute times 8 minutes or $7.12 per call. Next, multiply each per-call amount by the number of calls of that type completed throughout the year. $4.01 × 7,490 calls = $30,034.90; $4.67 × 5,806 calls = $27,114.02; and $7.12 × 1,300 calls = $9,256.00. The total cost allocated will be the sum of the values from the previous step = $30,034.90 + $27,114.02 + $9,256.00 = $66,404.92 (Choice C).

Eugene Is the Manager for Levy Corp, an HVAC Company