Baller Financial is a banking services company that offers many different types
ID: 2495897 • 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 = 52,000 accounts Checking account cost pools:
Annual activity information related to cost drivers:
Calculate the overhead cost per account for the Money Market Checking.
Cost Pool Cost Cost Drivers Returned check costs $2,830,000 Number of returned checks Checking account reconciliation costs 57,000 Number of account reconciliation requests New account setup 635,000 Number of new accounts Copies of cancelled checks 379,000 Number of cancelled check copy requests Online banking web site maintenance 183,000 Per product group (type of account)Explanation / Answer
Step 1:
Step 2:
Answer
Overhead cost per account = $ 13.20
Activity Cost Pool Cost Expected Use of CostDrivers per Activity Activity Based Allocation Rate [a] [b] [c] [b/c] Returned check costs 2,830,000 192,000 14.74 per returned checks Checking account reconciliation costs 57,000 379,000 0.15 per account reconciliation requests New account setup 635,000 59,000 10.76 per new accounts Copies of cancelled checks 379,000 96,000 3.95 per cancelled check copy requests Online banking web site maintenance 183,000 8 22,875.00 Per product group (type of account)
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