# Assigning corporate support costs, activity-based costing Zeta Department Store has developed the...

Assigning corporate support costs, activity-based costing Zeta Department Store has developed the following information in order to develop a timedriven ABC model for its Accounts Receivable Department:

The time to process payments of customer invoices depends on whether the customer pays the bill manually or electronically, as shown above. The time to maintain each customer file is the same for all customers. The annual cost of the Accounts Receivable Department is $500,000 and the associated practical capacity of accounts receivable labor is 10,000 hours. The Accounts Receivable Department has six employees. Required (a) What is the capacity cost rate for the Accounts Receivable Department? (b) Zeta’s Division 1 has 1,000 small- to medium-sized customers who annually generate a total of$10 million in sales, resulting in 4,000 invoices. These customers pay all their invoices manually. What is the annual activity-based cost associated with Division 1’s customers?
(c) Zeta’s Division 2 has 200 large customers who annually generate a total of \$10 million in sales, resulting in 400 invoices. These customers pay all of their invoices electronically. What is the annual activity-based cost associated with Division 2’s customers?
(d) Suppose half of Zeta’s Division 1 customers change their method of payment to electronic next year. How many hours of accounts receivable labor will it require for 1,000 customers, 2,000 manual invoices, and 2,000 electronic invoices? How much will Division 1 be charged for the accounts receivable function? Will Zeta’s costs decrease because of the shift to 50% electronic invoicing in Division 1?