Rosie Riveters is a home inspection company that specializes in pre-closing home inspections for single-family homes. Alexis, the owner, has tasked the accountant with addressing her budget concerns by finding an alternate way to cost aside from their current use of traditional costing. The accountant has determined that the advertising department may be first in line for analysis. The department handled the following volume during the year: responding to social media messages, 7,402 responses (1.5 minutes per response); responding to phone inquiries, 5,633 responses (3 minutes per response); and responding to mailed flyers, 1,340 responses (2 minutes per response). Rosie Riveters spent $167,900 to operate the advertising department, and these resources created a capacity of 35,000 minutes for Rosie Riveters. Using Time-Driven Activity-Based Costing (TDABC), how much cost will be allocated to responding to social media? (If required, round calculations to two decimal places.)

Question

Quizplus · Accepted Answer

This question requires multiple steps in order to be able to calculate the cost that will be allocated under TDABC. First, calculate the rate for supplying the activity by taking the total cost of the activity and dividing it by the practical capacity available expressed in time: $167,900/35,000 minutes = $4.80 per response. Next, multiply the per-minute rate by the number of minutes per response: $4.80 × 1.5 minutes = $7.20. Lastly, multiply the cost per response by the number of times activity was performed: $7.20 × 7,402 responses = $53,294.40 (Choice B).

Rosie Riveters Is a Home Inspection Company That Specializes in Pre-Closing