Baller Financial is a banking services company that offers many different types
ID: 2629315 • 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 = 56,000 accounts Checking account cost pools:
Cost Pool Cost Cost Drivers Returned check costs $2,900,000 Number of returned checks Checking account reconciliation costs 58,000 Number of account reconciliation requests New account setup 630,000 Number of new accounts Copies of cancelled checks 398,000 Number of cancelled check copy requests Online banking web site maintenance 191,000 Per product group (type of account) Annual activity information related to cost drivers:
Cost Pool All Products Money Market Checking Returned check 192,000 returned checks 18,000 Check reconciliation costs 398,000 checking account 420 New accounts 51,000 new accounts 15,000 Cancelled check copy requests 95,000 cancelled check 60,000 Web site costs 8 types of accounts 1 Calculate the overhead cost per account for the Money Market Checking.
Explanation / Answer
Annual number of accounts = 52,000 accounts Checking account cost pools:
Cost Pool
Cost
Cost Drivers
Returned check costs
$2,760,000
Number of returned checks
Checking account reconciliation costs
52,000
Number of account reconciliation requests
New account setup
644,000
Number of new accounts
Copies of cancelled checks
388,000
Number of cancelled check copy requests
Online banking web site maintenance
189,000
Per product group (type of account)
Annual activity information related to cost drivers:
Cost Pool
All Products
Money Market Checking
Returned check
200,000 returned checks
18,000
Check reconciliation costs
388,000 checking account
420
New accounts
60,000 new accounts
15,000
Cancelled check copy requests
100,000 cancelled check
60,000
Web site costs
2 types of accounts
1
Calculate the overhead cost per account for the Money Market Checking.
Cost Pool
Cost
Cost Drivers
Returned check costs
$2,760,000
Number of returned checks
Checking account reconciliation costs
52,000
Number of account reconciliation requests
New account setup
644,000
Number of new accounts
Copies of cancelled checks
388,000
Number of cancelled check copy requests
Online banking web site maintenance
189,000
Per product group (type of account)
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