Asked on February 21, 2013 Want an answer?
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 $ 141,000 Assistant branch manager salary 63,000 Branch manager salary 86,000 Total $ 290,000 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 % 74 % 15 % 11 % 100 % Assistant branch manager salary 9 % 11 % 22 % 58 % 100 % Branch manager salary 0 % 0 % 22 % 78 % 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 260 accounts opened Processing deposits and withdrawals 53,500 deposits and withdrawals Processing other customer transactions 850 other customer transactions Required:
1.Compute the activity rates for the activity-based costing system. 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.