Magic Golf is a small putt putt golf attraction that services a seasonally busy tourist season each summer. Sarah, the Controller, feels that Magic Golf would benefit from adding additional staff to their customer service line. A chief complaint of patrons is that it often takes too long to be checked in upon arrival and to be checked out upon departure. The management of Magic Golf has come to Sarah and asked her to put together some data that will assist them in assessing their strengths and weaknesses. Their business is cyclical, so it is imperative that they are able to determine whether or not they are best using their available resources regardless of the time of year. Sarah has decided to use Time-Driven Activity-Based Costing (TDABC) to assist with any future hiring plans in this area. The costs of assets and personnel in their customer service-based activities are $62,000, and the company has 101,000 minutes of capacity during the most recent year. The key activities for their customer service department and related time per transaction are as follows:

The cost incurred of assets and personnel of $62,000 is spread between the quarters in the following way: Quarter 1- 15%, Quarter 2- 35%, Quarter 3 - 45%, and Quarter 4- 5%. Sarah has compiled data and determined that Magic Golf had the following numbers of activities for each quarter:

Sarah is hopeful that she can complete her analysis in enough time for management to integrate her findings and suggestions into the next calendar year. Using TDABC, please answer the following questions.
(If required, round calculations to two decimal places.)
a. With costs assigned to each activity cost pool, calculate the cost per minute to supply an activity.
b. Calculate the cost per transaction for each key transaction that Sarah will then use to calculate her cost allocations. Based upon this information, is there an activity that Sarah may want to devote extra attention to while performing her analysis?
c. Using Sarah's compiled data, how much total cost was allocated to the customer service area during each quarter? How much was allocated to the customer service area for the year in total?
d. Using the percentages noted in the problem (Q1: 15%, Q2: 35%, Q3: 45%, and Q4: 5%), compare the actual costs incurred to the allocation amount calculated in part (c) for each quarter. How do you explain the difference, and which quarter has done the most efficient job of managing its resources?
e. Based on Sarah's estimate, do you believe that Magic Golf will need to hire another service employee? Are there any other suggestions or advice that Sarah could give?

Cost Drivers Are Used in Activity-Based Costing (ABC) to Allocate

Multiple Choice

Correct Answer:VerifiedUnlock this answer nowGet Access to more Verified Answers free of chargeAccess For Free

Correct Answer:
Verified
Unlock this answer now
Get Access to more Verified Answers free of charge