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 = 57,000 accounts   Checking account cost pools:

Annual activity information related to cost drivers:

Calculate the overhead cost per account for the Money Market Checking

Cost Pool Cost Cost Drivers Returned check costs $2,790,000 Number of returned checks Checking account reconciliation costs 53,000 Number of account reconciliation requests New account setup 637,000 Number of new accounts Copies of cancelled checks 388,000 Number of cancelled check copy requests Online banking web site maintenance 193,000 Per product group (type of account)

Explanation / Answer

Overhead Cost per Account for the money Market Checking Cost Pool Amount $ Returned Check          257,538 (2790000/195000 X18000) Check Reconciliation Cost                    59 (53000/380000 X 420) New Account Set Up          161,949 (637000/59000)*15000 Copies of Cancelled Cheque          242,500 (388000/96000)*60000 Online Banking Web Site Cost            24,125 (193000/8) Total Overhead Cost          686,171 Annual Number of Accounts            57,000 Cost per Account                 12.0

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