Baller Financial is a banking services company that offers many different types

Question

Baller Financial is a banking services company that offers many different types of checking accounts. The bank has recently adopted an activity-based costing system to assign costs to their various types of checking accounts. The following data relate to the money market checking accounts, one of the popular checking accounts, and the ABC cost pools:

Annual number of accounts = 50,000 accounts   Checking account cost pools:

Cost Pool             Cost                       Cost Drivers

Returned check costs     $2,800,000                           Number of returned checks

Checking account reconciliation costs     53,000                 Number of account reconciliation requests

New account setup         648,000                                 Number of new accounts

Copies of cancelled checks          390,000                                 Number of cancelled check copy requests

Online banking web site maintenance    182,000                                 Per product group (type of account)

                                             

Annual activity information related to cost drivers:

Cost Pool             All Products        Money Market Checking

Returned check                195,000 returned checks               18,000

Check reconciliation costs            390,000 checking account             420

New accounts 55,000 new accounts      15,000

Cancelled check copy requests 93,000 cancelled check 60,000

Web site costs 5 types of accounts         1

Calculate the overhead cost per account for the Money Market Checking.

Explanation / Answer

57

Column1 Column2 Column3 Column4 Column5 Column6 Column7 Column8 Column9 Column10 cost pool Cost cost per driver money marketing Cost of marketing Returned check 2,800,000 14.36 18,000 258462 Checking amount 53,000 0.14 420

57

new account setup 648,000 11.78 15,000 176727 copies of cancelled 390,000 4.19 60,000 251613 online bnaking 182,000 36400.00 1 36400 723259 cost per unit = 723259/50,000 14.47 (the answer may vary sinc ei have rounded cost per driver to two figures and cost of marketing is rounded to whole number cost per driver = cost / cost driver

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