Chapter 7.A, Problem 5P

PROBLEM 7A-5 Time-Driven Activity-Based Costing LO 7-6, LO 7-7

Athens Company is conducting a time-driven activity-based costing study in its Engineering Department. To aid the study, the company provided the following data regarding its Engineering Department and the customers served by the department:

New	Engineering
	Product	Change	Product
	Design	Orders	Testing
Hours per unit of the activity	. 40	20	8
	Customer	Customer	Customer	All
	A	B	C	Customers
Number of new products designed....	. 3	2	4	180
Number of engineering change orders ...	. 5	2	2	250
Number of products tested	. 8	4	6	160

Required:

1. Using the customer cost analysis shown in Exhibit 7A-2 as your guide, compute the following:
1. The cost per hour of the resource supplied in the Engineering Department.
2. The time-driven activity rate per hour for each of Athens’ three activities.
3. The total engineering costs consumed by Customer A, Customer B, and Customer C.
2. Using the capacity analysis shown in Exhibit 7A-3 as your guide, compute the following:
1. The used capacity in hours.
2. The unused capacity in hours.
3. The unused capacity in number of employees. (Do not round your answer to a whole number.)
4. The impact on expenses of matching capacity with demand. (Be sure to round your potential adjustment in the number of employees to a whole number.)
3. Assume that Athens is considering expanding its business such that the estimated number of new products designed would increase to 250, the number of engineering change orders would jump to 320, and the number of products tested would rise to 240. Using these revised figures, calculate the following:
1. The used capacity in hours.
2. The unused capacity in hours.
3. The unused capacity in number of employees. (Do not round your answer to a whole number.)
4. The impact on expenses of matching capacity with demand. (Be sure to round your potential adjustment in the number of employees to a whole number.)