Susan is an accountant for Spruce, Inc., a small lawn care business, and she is trying to determine whether or not they should implement Time-Driven Activity-Based Costing (TDABC). Spruce has several customer-centric activities including: Initial Phone Consultation, Appointment Setting, and Sales Follow-Up. Supporting these activities, Spruce has incurred costs of $198,800 last year, and Spruce has 605,800 minutes per year within their capacity. Susan has gathered the following information:
How much total cost would be allocated to Sales Follow-Up? (If required, round calculations to two decimal places.)

Question

Susan is an accountant for Spruce, Inc., a small lawn care business, and she is trying to determine whether or not they should implement Time-Driven Activity-Based Costing (TDABC). Spruce has several customer-centric activities including: Initial Phone Consultation, Appointment Setting, and Sales Follow-Up. Supporting these activities, Spruce has incurred costs of $198,800 last year, and Spruce has 605,800 minutes per year within their capacity. Susan has gathered the following information:
 How much total cost would be allocated to Sales Follow-Up? (If required, round calculations to two decimal places.)

Quizplus · Accepted Answer

First, this question requires that the calculation of the rate for supplying an activity: $198,800/605,800 minutes = $0.33 per minute. Next, calculate the cost per transaction for each sales follow-up call: $0.33 per minute times 8 minutes equals $2.64 per sales follow-up call. This leads to total sales follow-up costs of $63,096.00: Choice A (23,900 sales follow-up calls times $2.64 per call).

Susan Is an Accountant for Spruce, Inc