Baller Financial is a banking services company that offers many different types
ID: 2765194 • Letter: B
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 = 56,000 accounts Checking account cost pools:
Cost Pool
Cost
Cost Drivers
Returned check costs
$2,970,000
Number of returned checks
Checking account reconciliation costs
52,000
Number of account reconciliation requests
New account setup
646,000
Number of new accounts
Copies of cancelled checks
377,000
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
198,000 returned checks
18,000
Check reconciliation costs
377,000 checking account
420
New accounts
54,000 new accounts
15,000
Cancelled check copy requests
96,000 cancelled check
60,000
Web site costs
8 types of accounts
1
Calculate the overhead cost per account for the Money Market Checking.
Cost Pool
Cost
Cost Drivers
Returned check costs
$2,970,000
Number of returned checks
Checking account reconciliation costs
52,000
Number of account reconciliation requests
New account setup
646,000
Number of new accounts
Copies of cancelled checks
377,000
Number of cancelled check copy requests
Online banking web site maintenance
182,000
Per product group (type of account)
Explanation / Answer
Overhead cost per account = 707877.37 / 56000 =$ 12.64 per account
cost pool Returned check 2970000*18000/198000 270000 Check reconciliation costs 52000/420/377000 57.93 New accounts 646000*15000/54000 179444.44 Cancelled check copy requests 377000*60000/96000 235625 Web site costs 182000*1/8 22750 Total 707877.37Related Questions
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