Bayview Manufacturing Company Has an Accounts Receivable Department That Performs

question 164

Essay

Bayview Manufacturing Company has an accounts receivable department that performs three activities within the department: processing customer credit applications, invoicing customers, and performing collection activities. During interviews, the employee survey reports that they spend 15 percent of their time processing credit applications, 55 percent of their time invoicing customers, and 30 percent of their time on collection activities. The accounts receivable department employs 10 associates for a total cost of $200,000. Assume each associate works 8 hours per day, 20 days per month, but an estimate of practical capacity is 80 percent. After close observation of the employee's daily work, managers conclude the following:

The estimated monthly quantities of work in the three activities are 500 credit applications, 18,000 invoices, and 900 collection calls.
Required:
1. Under a traditional ABC system, what is the cost of one unit of activity?
2. Assuming the practical capacity information, what is the cost per minute of supplying capacity?
3. Under time-driven ABC, what are the cost driver rates for each activity?

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Definitions:

Dramatistic Analysis

A method in communication studies for examining motivations and actions within narratives by considering five elements: act, scene, agent, agency, and purpose.

Purpose

The reason for which something is done or created, or for which something exists.

Conversation Analysis

A methodological approach to studying the structure and pattern of conversations to understand how participants comprehend and respond to one another.

Utterances

These are units of speech or segments of verbal expression that convey meaning in spoken language.