Baller Financial is a banking services company that offers many different types

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 pools:

Annual activity information related to cost drivers:

  

Calculate the overhead cost per account for the Money Market Checking?

Cost Pool Cost Cost Driver Returned check cost $2,930,000 # of returned checks Checking acct recon cost $54000 # of acct recon requests new account set up $637,000 # of new accounts copies of cancelled checks $397000 # of cancelled check copy requests Online banking website maintenance    $192,000 per product group (type of account)

Explanation / Answer

Computation is as follows

Overhead cost per account for money market checking = $722,075.84 / 56000 = $ 12.89

Cost pool Cost driver Cost Total cost driver Cost per cost driver Money market checking account cost driver Overhead costs for money market checking account [Given] (a) [Given] (b) (c) = (a) / (b) [Given] (d) (c) * (d) Returned check costs # of returned checks $2,930,000 194,000 $15.10 per returned check 18,000 $271,855.67 Checking acct recon cost # of acct recon requests $54,000 397,000 $0.14 per acct recon request 420 $57.13 New acct set-up # of new accounts $637,000 60,000 $10.62 per new account 15,000 $159,250.00 Copies of cancelled checks # of cancelled check copy requests $397,000 92,000 $4.32 per cancelled check copy request 60,000 $258,913.04 Online banking website maintenance Per product group (type of account) $192,000 6 $32,000 per type of account 1 $32,000.00 Total $722,075.84

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