The following information relates to the purchasing activity in a division of the Etna Company for the next year:
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(1) Resources supplied |
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10 full-time staff at £30 000 per year |
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(including employment costs) |
= £300 000 annual activity cost |
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Cost driver |
= Number of purchase orders processed |
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Quantity of cost driver supplied per year: |
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(Each member of staff can process 1500 orders per year) |
= 15 000 purchase orders |
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Estimated cost driver rate |
= £20 per purchase order |
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(£300 000/15 000 orders) |
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(2) Resources used |
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Estimated number of purchase orders to be |
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processed during the year |
= 13 000 |
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Estimated cost of resources used assigned |
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to parts and materials |
= £260 000 (13 000 x £20) |
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(3) Cost of unused capacity |
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Resources supplied (15 000) — Resources |
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used (13 000) at £20 per order |
= £40 000 (2000 x £20) |