Question

Simplifying the ABC System: TDABC

Golding Bank provided the following data about its resources and activities for its checking account process:

Resources			Activities	Time per Unit		Activity Driver
Supervision	$54,000		Processing accounts	0.20 hr.		No. of accounts
Phone and supplies	82,000		Issuing statements	0.10 hr.		No. of statements
Salaries	262,000		Processing transactions	0.05 hr.		No. of transactions
Computer	18,000		Answering customer inquiries	0.15 hr.		No. of inquiries
Total	416,000
Total check processing hours	26,000
	(practical capacity)

Required:

1. Calculate the capacity cost rate for the checking account process. Round your answer to the nearest cent.
$ per hour

2. Calculate the activity rates for the four activities. Round your answers to the nearest cent.

Processing accounts	$ per account
Issuing statements	$ per statement
Processing transactions	$ per transaction
Answering inquiries	$ per inquiry

If the total number of statements issued was 20,000, calculate the cost of the issuing statements activity.
$

3. What if process improvements decreased the number of customer inquiries, leading to a 10 percent reduction in check processing hours and a $4,160 reduction in total resource costs? Calculate the capacity cost rate for the checking account process. Round your answers to the nearest cent.

$ per hour

Update all the activity rates for these changes in operating conditions.

Processing accounts	$ per account
Issuing statements	$ per statement
Processing transactions	$ per transaction
Answering inquiries	$ per inquiry

Answer 1