Saratoga Company manufactures jobs to customer specifications. The company is conducting a time-driven activity-based costing study in its Purchasing Department to better understand how Purchasing Department labor costs are consumed by individual jobs. To aid the study, the company provided the following data regarding its Purchasing Department and three of its many jobs:

Number of employees	8
Average salary per employee	$ 28,500
Weeks of employment per year	52
Hours worked per week	40
Practical capacity percentage	85%

	Requisition Processing	Bid Evaluation	Inspection
Minutes per unit of the activity	15	45	30

	Job X	Job Y	Job Z
Number of requisitions processed	9	6	5
Number of bid evaluations	5	4	6
Number of inspections	8	4	8

Now assume that Saratoga Company would like to answer the following “what if” question using its time-driven activity-based costing system: Assuming our estimated activity demands for all jobs in the next period will be as shown below, how will this affect our job costs and our staffing levels within the Purchasing Department?

	Requisition Processing	Bid Evaluation	Inspection
Activity demands for all jobs	5,500	8,200	9,700

Required:

1. Will the revised activity demands affect the total Purchasing Department labor costs assigned to Job X, Job Y, and Job Z?

2. Using the revised activity demands, calculate Saratoga’s used capacity in minutes.

3. Using the revised activity demands, calculate Saratoga’s unused capacity in minutes.

4. Using the revised activity demands, calculate Saratoga’s unused capacity in number of employees. 

5. Based on the revised activity demands, calculate the impact on expenses of matching capacity with demand.

Answer rating: 100% (QA)

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