Time-Driven Activity-Based Budgeting (TDABB) The company for which you work recentlyimplemented time-driven activity-based costing (TDABC) in conjunction with its enterpriseresource planning (ERP) system. Management is pleased with the revised product and customer costinformation that the TDABC system produces. It is now wondering how this system can be used forbudgeting purposes. You have been asked to provide an example of using time-driven activity-basedbudgeting, given the following information:1. There are two resources (departments): indirect labor and computer support.2. There are two primary activities that these resources support: handling production runs andproduct-level support.3. Indirect labor support is consumed as follows:a. To handle production runs: 10 hours/run.b. To support products: 500 hours/product.4. Computer support is consumed as follows:a. To handle production runs: 0.4 hour/run.b. To support products: 50 hours/product.5. Resource practical capacity levels:a. Indirect labor: 20,000 hours per quarter.b. Computer support: 500 hours per quarter.6. Cost of supplying resources:a. Indirect labor: $1,000,000 per quarter.b. Computer support: $500,000 per quarter.Required1. Calculate the budgeted resource cost per hour (at practical capacity) for each of the two resources, indirect labor support and computer support.2. Determine the budgeted cost-driver rates for each of the two activities, handle production runs and support products.3. Suppose that the total cost of resources supplied for the quarter just ended was exactly as budgeted(i.e., $1,500,000) but that only 18,000 indirect labor hours were used along with 450 computer hours.Calculate, for each resource, the cost of idle capacity. How should this cost be handled for internalreporting purposes?
Time-Driven Activity-Based Budgeting (TDABB) The company for which you work recently
implemented time-driven activity-based costing (TDABC) in conjunction with its enterprise
resource planning (ERP) system. Management is pleased with the revised product and customer cost
information that the TDABC system produces. It is now wondering how this system can be used for
budgeting purposes. You have been asked to provide an example of using time-driven activity-based
budgeting, given the following information:
1. There are two resources (departments): indirect labor and computer support.
2. There are two primary activities that these resources support: handling production runs and
product-level support.
3. Indirect labor support is consumed as follows:
a. To handle production runs: 10 hours/run.
b. To support products: 500 hours/product.
4. Computer support is consumed as follows:
a. To handle production runs: 0.4 hour/run.
b. To support products: 50 hours/product.
5. Resource practical capacity levels:
a. Indirect labor: 20,000 hours per quarter.
b. Computer support: 500 hours per quarter.
6. Cost of supplying resources:
a. Indirect labor: $1,000,000 per quarter.
b. Computer support: $500,000 per quarter.
Required
1. Calculate the budgeted resource cost per hour (at practical capacity) for each of the two resources, indirect labor support and computer support.
2. Determine the budgeted cost-driver rates for each of the two activities, handle production runs and support products.
3. Suppose that the total cost of resources supplied for the quarter just ended was exactly as budgeted
(i.e., $1,500,000) but that only 18,000 indirect labor hours were used along with 450 computer hours.
Calculate, for each resource, the cost of idle capacity. How should this cost be handled for internal
reporting purposes?
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