Using Activity-Based Approach The following data are from the general records of

Question

Using Activity-Based Approach The following data are from the general records of the Loading Department of Bowman Freight Company for November. Cleaning incoming trucks, 20 minutes. Obtaining and reviewing shipping documents for loading truck and instructing loaders, 30 minutes. Loading truck, 1 hour and 30 minutes. Cleaning shipping dock and storage area after each loading, 10 minutes. Employees perform both cleaning and loading tasks and are currently averaging $16 per hour in wages and benefits. The supervisor spends 10 percent of her time overseeing the cleaning activities; 60 percent overseeing various loading activities; and the remainder of her time making general plans and managing the department. Her current salary is $4,000 per month. Other overhead of the department amounts to $10,000 per month, 20 percent for cleaning and 80 percent for loading. Prepare an activities budget for cleaning and loading in the Loading Department for November, assuming 20 working days and the loading of an average of 14 trucks per day.

Explanation / Answer

Activities Budget:

Particulars                                                               Cleaning                               Loading

Time taken for cleaning incoming trucks             20 x 14 = 280 min                             -

Time takne for obtaining & reviewing shipping

documents for loading truck and instructing loaders                                       30 x 14 =420 min

Time taken for loading trucks                                                                            90 x 14 = 1260 min

Time taken for cleaning doci andstorage area      10 x 14 = 140 min                    --

Total time taken                                                                     420 min               1680 min

Time taken for the month of November                 420 x 20 = 8400 min          1680 x 20 = 33,600 min

Time taken in term of hours                                   8400/60 = 140 hrs              33,600/60 = 560 hrs

Cost @ $ 16 per hour                                             140 x 16 = $ 2240             560 x 16 = $ 8960

Supervisor salary  @ $ 4000 p.m                           4000 x 10% = $ 400          4000 x 60%= $ 2,400

Other overheads @ $ 10,000 p.m                         10000 x 20% = 2,000         10,000 x 80% - = 8000

Total Estimated cost                                            2240+400+2000= $ 4640     8960+2400+8000 = $ 19360                                                                                                                                             

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