Question

DRT Bank has 10 automatic teller machines (ATM) spread throughout the city
maintained by the ATM Department. You have been assigned the task of determining
the cost of operating each machine. Management will use the information you develop
to evaluate the desirability of continuing to operate each machine and/or changing
security arrangements for a particular machine.
The ATM Department consist of a total of six employees: a supervisor, a head cashier,
two associate cashiers, and two maintenance personnel. The associate cashiers make
between two and four daily trips to each machine to collect and replenish cash and to
replenish supplies, deposit tickets and so forth. Each machine contains a small computer
that automatically summarizes and reports transactions to the head cashier. The
head cashier reconciles the activities of the two associate cashiers to the
computerized reports. The supervisor, who does handle cash, reviews the reconciliation.
When an automatic teller's computer, a customer, or a cashier reports a problem, the
two maintenance employees and one cashier are dispatched immediately. The cashier
removes all cash and transaction records, and the maintenance employees repair the
machine.
Monthly operating costs and information on percentage of time that used in activities for a recent month follows:
Operating costs:							Routine Trip Related Activity percentage	Maintenance-related activities percentage
Supervisor Salary					$4,200		60%	40%
Head cashier Salary					3,000		75%	25%
Associate cashiers Salary ($1,800 each Assoc. cashier)					3,600		50%	50%
Maintenance workers salary ($1,800 each Maintenance worker)					3,600			100%
Cashiers' service vehicle-used for Routine trips					1,500		100%
Maintenance service vehicle-used for maintenance activities					1,400			100%
Office rent and utilities-used equally preparing for routine and maintenance activities					2,500		50%	50%
Machine lease, space rent, and utilities ($1,500 each machine)					15,000
Total operating cost for month					$34,800
Related monthly activity information for this month follows:
Machine	Routine Trips	Maintenance Hours
1	30	5
2	90	17
3	60	15
4	60	30
5	120	15
6	30	10
7	90	25
8	120	5
9	60	20
10	60	18
	720	160

1. Determine the monthly operating costs of a machine when cost assignments are

based on the number of machines. Conceptually this is like the plantwide overhead rate per unit.

Hint: Do not make this complicated, since you are given the total overhead cost and know there are 10 machines.

2. You have determined that ABC would be a more effective costing method. You have decided to

split the costs into 3 activities: Routine trip, maintenance, and machine lease-space rent-utilities.

Round answers to the nearest cent.

						Routine Trips	Maintenance	Machine lease, space rent, and utilities
Supervisor Salary
Head cashier Salary
Associate cashiers Salary ($1,800 each Assoc. cashier)
Maintenance workers salary ($1,800 each Maintenance worker)
Cashiers' service vehicle-used for Routine trips
Maintenance service vehicle-used for maintenance activities
Office rent and utilities-used equally preparing for routine and maintenance activities
Machine lease, space rent, and utilities ($1,500 each machine)
Total per activity
Quantity of activity
Unit activity rates

Answer 1

1.

Number of machines 10

Total operating costs $34,800

Operating cost per machine $3,480

2.

	Total	Round Trips		Maintenance		Machine lease,
						space rent
		%	Amount	%	Amount	and utilities
Supervisor Salary	4200	60%	2520	40%	1680
Head Cashier Salary	3000	75%	2250	25%	750
Asociate casheirs' Salary	3600	50%	1800	50%	1800
Maintenance workers' Salary	3600		0	100%	3600
Cashier's Service Salary	1500	100%	1500		0
Maitenance Service Vehicle	1400		0	100%	1400
Office Rent and Utilities	2500	50%	1250	50%	1250
Machine lease, space rent and utilities	15000					15000
Total Per Activity			9320		10480
Quantity of Activity			720		160
Unit Activity Rates			12.94		65.50