Tannhauser Financial is a banking services company that offers many different types of checking accounts. It has recently adopted an activity-based costing system to assign costs to various types of checking accounts. The following data relate to one type of checking account, the money market checking account, and the ABC cost pools:Money Market Checking Account:
Annual number of accounts 60,000 accounts
Checking account cost pools:
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Annual activity information related to cost drivers:
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Required:
a. Calculate the cost rate per cost driver activity for each of the five cost pools. Round to two decimal places
b. Calculate the total cost assigned to the money market checking account.
c. Suppose that Tannhauser Financial allocates overhead using the number of checking accounts as the allocation base and one cost pool. Determine the cost rate per checking account and the per account cost assigned to the money market checking account. Discuss the difference in cost allocations between this method and the activity-based costing approach.