|
The operations vice president of First Bank of Eagle, Kristin
Wu, has been interested in investigating the efficiency of the bank’s
operations. She has been particularly concerned about the costs of handling
routine transactions at the bank and would like to compare these costs at the
bank’s various branches. If the branches with the most efficient operations
can be identified, their methods can be studied and then replicated
elsewhere. While the bank maintains meticulous records of wages and other
costs, there has been no attempt thus far to show how those costs are related
to the various services provided by the bank. Ms. Wu has asked your help in
conducting an activity-based costing study of bank operations. In particular,
she would like to know the cost of opening an account, the cost of processing
deposits and withdrawals, and the cost of processing other customer
transactions.
|
|
The Avon branch of
First Bank of Eagle has submitted the following cost data for last year:
|
|
Teller wages
|
$
|
154,000
|
|
Assistant branch
manager salary
|
74,000
|
|
|
Branch manager salary
|
88,000
|
|
|
|
|
|
|
Total
|
$
|
316,000
|
|
|
|
|
|
|
||
|
Virtually all of the other costs of the branch—rent, depreciation,
utilities, and so on—are organization-sustaining costs that cannot be
meaningfully assigned to individual customer transactions such as depositing
checks.
|
|
In addition to the cost data above, the employees of the Avon
branch have been interviewed concerning how their time was distributed last
year across the activities included in the activity based costing study. The
results of those interviews appear below:
|
|
Distribution of Resource Consumption Across
Activities
|
|||||||||||
|
Opening Accounts
|
Processing
Deposits and Withdrawals |
Processing
Other Customer Transactions |
Other
Activities |
Totals
|
|||||||
|
Teller wages
|
0
|
%
|
72
|
%
|
16
|
%
|
12
|
%
|
100
|
%
|
|
|
Assistant branch
manager salary
|
12
|
%
|
16
|
%
|
25
|
%
|
47
|
%
|
100
|
%
|
|
|
Branch manager salary
|
0
|
%
|
0
|
%
|
21
|
%
|
79
|
%
|
100
|
%
|
|
|
|
|||||||||||
|
The manager of the Avon branch of First Bank of Eagle has
provided the following data concerning the transactions of the branch during
the past year:
|
|
Activity
|
Total Activity at the
Avon Branch
|
|
|
Opening accounts
|
210
|
accounts opened
|
|
Processing deposits
and withdrawals
|
47,500
|
deposits and
withdrawals
|
|
Processing other
customer transactions
|
1,300
|
other customer
transactions
|
|
|
||
|
Required:
|
|
|
1.
|
Compute the activity rates for the activity-based costing
system. (Round your answers to 2
decimal places. Omit the "$" sign in your response.)
|
|
Activity Cost Pool
|
Activity Rate
|
|
|
Opening accounts
|
$
|
per account opened
|
|
Processing deposits
and withdrawals
|
$
|
per deposit or
withdrawal
|
|
Processing other
customer transactions
|
$
|
per other customer
transaction
|
|
|
||
Explanation:
1.
|
Distribution of Resource Consumption Across
Activities
|
||||||||||
|
Opening
Accounts |
Processing
Deposits and Withdrawals |
Processing
Other Customer Transactions |
Other
Activities |
Totals
|
||||||
|
Teller wages
|
$
|
0
|
$
|
110,880
|
$
|
24,640
|
$
|
18,480
|
$
|
154,000
|
|
Assistant branch
manager salary
|
8,880
|
11,840
|
18,500
|
34,780
|
74,000
|
|||||
|
Branch manager salary
|
0
|
0
|
18,480
|
69,520
|
88,000
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost
|
$
|
8,880
|
$
|
122,720
|
$
|
61,620
|
$
|
122,780
|
$
|
316,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Teller wages:
|
|
Opening accounts =
$154,000 × 0% = $0
|
|
Processing deposits
and withdrawals = $154,000 × 72% = $110,880
|
|
Processing other
customer transactions = $154,000 × 16% = $24,640
|
|
Other activities =
$154,000 × 12% = $18,480
|
|
Assistant branch manager salary: |
|
Opening accounts =
$74,000 × 12% = $8,880
|
|
Processing deposits
and withdrawals = $74,000 × 16% = $11,840
|
|
Processing other
customer transactions = $74,000 × 25% = $18,500
|
|
Other activities =
$74,000 × 47% = $34,780
|
|
Branch manager salary: |
|
Opening accounts =
$88,000 × 0% = $0
|
|
Processing deposits
and withdrawals = $88,000 × 0% = $0
|
|
Processing other
customer transactions = $88,000 × 21% = $18,480
|
|
Other activities =
$88,000 × 79% = $69,520
|
Computation of activity rates:
|
(a)
|
(b)
|
(a) ÷ (b)
|
|||||
|
Activity Cost Pool
|
Total Cost
|
Total Activity
|
Activity Rate
|
||||
|
Opening accounts
|
$
|
8,880
|
210
|
accounts opened
|
$
|
42.29
|
per account opened
|
|
Processing deposits
and withdrawals
|
$
|
122,720
|
47,500
|
deposits and
withdrawals
|
$
|
2.58
|
per deposit or
withdrawal
|
|
Processing other
customer transactions
|
$
|
61,620
|
1,300
|
other customer
transactions
|
$
|
47.40
|
per other customer
transaction
|
|
|
|||||||
No comments:
Post a Comment