13. Will rate

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:

1. a.To handle production runs: 10 hours/run.
2. b.To support products: 670 hours/product.

4. Computer support is consumed as follows:

1. a. To handle production runs: 2.1 hours/run.
2. b. To support products: 67 hours/product.

5. Resource practical capacity levels:

1. a. Indirect labor: 23,400 hours per quarter.
2. b. Computer support: 670 hours per quarter.

6. Cost of supplying resources:

1. a. Indirect labor: $1,567,800 per quarter.
2. b. Computer support: $522,600 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., $2,090,400) but that only 21,400 indirect labor hours were used along with 620 computer hours. Calculate, for each resource, the cost of idle capacity.

4. After implementing a total quality management (TQM) program, the company was able to implement process-efficiency changes, the end result of which was a 20% reduction in the indirect labor time associated with the activity handling production runs. Recalculate the indirect labor cost component of the cost to handle a production run. Also, recalculate the cost of idle capacity for indirect labor assuming the original facts but with the 20% efficiency gain. Assume that in the original case facts, 17,700 of the 21,400 hours relate to the activity handling production runs (while the remaining 3,700 hours relate to the activity product-level support).

**Solve 1, 2, 3, and 4**

Exercise 10-43 Time-Driven Activity-Based Budgeting (TDABB) [LO 10-7] 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: 670 hours/product. 4. Computer support is consumed as follows: a. To handle production runs: 2.1 hours/run. b. To support products: 67 hours/product. 5. Resource practical capacity levels: a. Indirect labor: 23,400 hours per quarter. b. Computer support: 670 hours per quarter. 6. Cost of supplying resources: a. Indirect labor: $1,567,800 per quarter. b. Computer support: $522,600 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., $2,090,400) but that only 21,400 indirect labor hours were used along with 620 computer hours. Calculate, for each resource, the cost of idle capacity. 4. After implementing a total quality management (TQM) program, the company was able to implement process-efficiency changes, the end result of which was a 20% reduction in the indirect labor time associated with the activity handling production runs. Recalculate the indirect labor cost component of the cost to handle a production run. Also, recalculate the cost of idle capacity for indirect labor assuming the original facts but with the 20% efficiency gain. Assume that in the original case facts, 17,700 of the 21,400 hours relate to the activity handling production runs (while the remaining 3,700 hours relate to the activity product-level support). Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Calculate the budgeted resource cost per hour (at practical capacity) for each of the two resources, indirect labor support and computer support. Resource Budgeted Cost Practical Budgeted Capacity Cost per (Hours) Hour 23,400 $ 67 670 $ 780 Indirect labor support Computer support $ 1,567,800 $ 522,600 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Determine the budgeted cost-driver rates for each of the two activities, handle production runs and support products. Exercise Activity #1: Handle production runs Activity #2: Support products $ 2,308 per run 97,150 per product Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Suppose that the total cost of resources supplied for the quarter just ended was exactly as budgeted (i.e., $2,090,400) but that only 21,400 indirect labor hours were used along with 620 computer hours. Calculate, for each resource, the cost of idle capacity. Cost of Idle Capacity Resource Indirect labor Computer support Cost of idle capacity should be Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 After implementing a total quality management (TQM) program, the company was able to implement process-efficiency changes, the end result of which was a 10% reduction in the indirect labor time associated with the activity handling production runs. Recalculate the indirect labor cost component of the cost to handle a production run. Also, recalculate the cost of idle capacity for indirect labor assuming the original facts but with the 10% efficiency gain. Assume that in the original case facts, 16,000 of the 18,000 hours relate to the activity handling production runs (while the remaining 2,000 hours relate to the activity product-level support). Show less Revised Budgeted Cost-Driver Rate: Resource Budgeted Cost- Driver Rate Indirect labor per run Revised Cost of Idle Capacity: Cost of Idle Resource Capacity Indirect labor