Assume That the Accounts Payable Department of a Company Has

question 37

Essay

Assume that the accounts payable department of a company has five clerks; each one is paid $25,000 per year ($125,000 total clerical salaries). On average, the clerks spend:
20% of time on processing payments
30% of time matching invoices, receiving documents, and billing statement
50% of time correcting errors in the various documents
In addition, long distance telephone costs of $1,700 are directly traced to the activity "correcting errors."
A. Assign the clerical salary cost to each of the three activities.
B. Calculate the total cost of the "correcting errors" activity.

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Definitions:

Times Interest Earned

A financial ratio measuring a company's ability to meet its interest obligations from operating earnings, calculated as income before interest and taxes divided by interest expense.

Interest Expense

The financial outlay associated with an entity's use of borrowed resources over time.

Times Interest Earned Ratio

A financial metric used to measure the company's ability to meet its debt obligations by comparing its income before interest and taxes to its interest expenses.

Interest Expense

The cost incurred by an entity for borrowed funds, typically reflected in income statements as a cost of financing operations.