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.

The Westfield branch of Security Home Bank has submitted the following cost data for last year:

Teller Wages	$153,000
Assistant branch manager salary	74,000
Branch manager salary	88,000
Total	$315,000

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:

	Opening accounts	Distribution of Resource Consumption Across Activities Processing Deposits and withdrawals	Processing other customer transactions	Other Activities	Totaal
Teller wages	4%	69%	20%	7%	100%
Assistant branch manager salary	13%	11%	27%	49%	100%
Branch manager salary	4%	0%	23%	73%	100%

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:

Activity	Total activity at the Westfield Brach
Opening accounts	185 new accounts opened
Processing deposits and withdrawals	52,000 deposits and withdrawals processed
Processing other customer transactions	1,050 other customer transactions processed

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

Activity Cost Pool	Activity rate
Opening accounts	?	per account opened
Processing deposits and withdrawals	?	per deposit or withdrawal
Processing other customer transactions	?	per other customer transaction

Answer 1

First stage allocation

	Opening accounts	Distribution of Resource Consumption Across Activities Processing Deposits and withdrawals	Processing other customer transactions	Other Activities	Total
Teller wages	6120	105570	30600	10710	153000
Assistant branch manager salary	9620	8140	19980	36260	74000
Branch manager salary	3520	0	20240	64240	88000
Total	19260	113710	70820	111210	315000

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

Activity Cost Pool	Activity rate
Opening accounts	19260/185 = 104.11	per account opened
Processing deposits and withdrawals	113710/52000 = 2.19	per deposit or withdrawal
Processing other customer transactions	70820/1050 = 67.45	per other customer transaction