operations vice president of Security Home Bank has been interested in g the eff
ID: 2555409 • Letter: O
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operations vice president of Security Home Bank has been interested in g the efficiency of the bank's operations. She has been particularly concerned about the 3. (8 points) The investigatin costs of handling various branche can be studie and other s. If the branches with the most efficient operations can be identified, their methods d and then replicated elsewhere. While the bank maintains meticulous records of wages routine transactions at the bank and would like to compare these costs at the bank's 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. costs, there has been no attempt thus far to show how those costs are related to the The Westfield branch of Security Home Bank has submitted the following cost data for last year Teller wages Assistant branch manager salary Branch manager salary Total $ 160,000 75,000 80,000 $ 315,000 Virtually all other costs of the branch-rent, depreciation, utilities, and so on-are organization-sustaining costs that cannot be meaningfully assigned to individual customer transactions such as depositing checks. 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 the activity-based costing study. The results of those interviews appear below: Distribution of Resource Consumption Across Activities Processing Other Customer Processing OpeningDeposits and Accounts Withdrawals Transactions Other Activities Totals 100% 100% 100% 65% 10% 50% 85% 250% Teller wages Assistant branch manager salary Branch manager salary 5% 15% 5% 0% 10% The manager of the Westfield branch of Security Home Bank has provided the following data the transactions of the branch during the past year Total Activity at the Westfield Branch 500 new accounts opened Opening accounts Processing deposits and withdrawals Processing other customer transactions 100,000 deposits and withdrawals processed 5,000 other customer transactions processedExplanation / Answer
STATEMENT SHOWING FIRST STAGE ALLOCATION OF COST TO ACTIVITY POOL BASIS OF Op. Accounts Processing Other transactions Other Total APPORTION IN $ IN $ IN $ Activities IN $ Teller wages 5:65:20:10 8,000 104,000 32,000 16,000 160,000 Assit. Manager Manager 15:5:30:50 11,250 3,750 22,500 37,500 75,000 BM salary 5:0:10:85 4,000 0 8,000 68,000 80,000 TOTAL COST OF ACTIVITY 23,250 107,750 62,500 121,500 315,000 STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL Activity Total Expected Activity ACTIVITY COST POOL Measures Overheads Activity Rate Opening Accounts Accounts opened 23,250 500 46.50 depositsProcessing Deposits & withrawls. 107,750 100,000 1.08 Pprocessing other transaction Other transactions 62,500 5,000 12.50 Oh cost of customer: Opening Accounts cost ( 2 accounts @46.50) 93 Deposits processing (50 @1.08) 54 Other transaction (10*12.50) 125 Total OH cost 272
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