The operations vice president of Security Home Bank has been interested in inves

Question

The operations vice president of Security Home Bank 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. The operations vice president 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.

     Virtually all 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 Westfield 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:

The manager of the Westfield branch of Security Home Bank has provided the following data concerning the transactions of the branch during the past year:

Compute the activity rates for the activity-based costing system. (Round your answers to 2 decimal places.) This should calculate

a. openinging accounts ___ per accounts opened

b. processing deposits and withdrawls ___ per deposit or withdraw

c. processing other customer transactions __ per

The operations vice president of Security Home Bank 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. The operations vice president 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.

Explanation / Answer

Opening account Processing deposit processing other customer transaction Teller wages 8000      [160000*.05] 104000     [160000*.65] 32000       [160000*.20] Assistant Branch manager salary 11250      [75000*.15] 3750      [75000*.05] 22500        [75000*.30] Branch manager salary 4000      [80000*.05] 0 8000          [80000*.10] Total allocated cost 23250 107750 62500 Activty 500 100,000 5,000 cost per activity driver 46.5 per account operned   [23250/500] 1.0775 per deposit or withdraw    [107750/100000] 12.5 per transaction    [ 62500/5000]

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