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 cost Spruce $198,800 last year, and Spruce has 605,800 minutes within their capacity. Susan has gathered the following information:
How much total cost would be allocated to the key activities? (Do not round calculations.)

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 cost Spruce $198,800 last year, and Spruce has 605,800 minutes within their capacity. Susan has gathered the following information:
 How much total cost would be allocated to the key activities? (Do not round calculations.)

Quizplus · Accepted Answer

First, this question requires 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 type of call: initial phone consultation call, $0.33 per minute times 6 minutes equals $1.97 per call; appointment setting call, $0.33 per minute times 7.5 minutes equals $2.46 per call; and sales follow-up call, $0.33 per minute times 8 minutes equals $2.63 per call. Lastly, find the total cost for each call type, and add them for a total overall cost: ($1.97 × 33,600 calls) + ($2.46 × 28,400 calls) + ($2.63 × 23,900 calls) = $66,157.28 + $69,898.32 + $62,744.40 = $198,800.00 (Choice D).

Susan Is an Accountant for Spruce, Inc