Activity-Based Costing for a Service Business Metropolitan Bank uses activity-ba
ID: 2492518 • Letter: A
Question
Activity-Based Costing for a Service Business
Metropolitan Bank uses activity-based costing to determine the cost of servicing customers. There are three activity pools: teller transaction processing, check processing, and ATM transaction processing. The activity rates associated with each activity pool are $3.30 per teller transaction, $0.16 per canceled check, and $0.08 per ATM transaction. Janelle Lawson had 9 teller transactions, 88 canceled checks, and 24 ATM transactions during the month.
Determine the total monthly activity-based cost for Lawson during the month. Round your answer to the nearest cent.
Explanation / Answer
Activity Pool
Activity
No. of activities
Activity rate
Activity based cost
(No. of activity*Activity rate)
Teller transaction processing
Teller transactions
9
$3.30
$29.70
Check processing
Cancelled checks
88
$0.16
$14.08
ATM transaction processing
ATM transactions
24
$0.08
$1.92
$45.70
Total monthly activity-based cost for Lawson during the month = $45.70
Activity Pool
Activity
No. of activities
Activity rate
Activity based cost
(No. of activity*Activity rate)
Teller transaction processing
Teller transactions
9
$3.30
$29.70
Check processing
Cancelled checks
88
$0.16
$14.08
ATM transaction processing
ATM transactions
24
$0.08
$1.92
$45.70
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