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 = 52,000 accounts Checking account cost pools:

Cost Pool Cost Cost Drivers

Returned check costs $2,790,000 Number of returned checks

Checking account reconciliation costs 52,000 Number of account reconciliation requests

New account setup 638,000 Number of new accounts

Copies of cancelled checks 397,000 Number of cancelled check copy requests

Online banking web site maintenance 188,000 Per product group (type of account)

Annual activity information related to cost drivers:

Cost Pool All Products Money Market Checking

Returned check 196,000 returned checks 18,000

Check reconciliation costs 397,000 checking account 420

New accounts 54,000 new accounts 15,000

Cancelled check copy requests 100,000 cancelled check 60,000

Web site costs 1 types of accounts 1

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

Explanation / Answer

Thus, Overhead Cost Per Account for the Money Market Cheking is $16.53 per Account.

Statement of Overhead Cost Per Account: Money market Checking Cost pools Cost NO. Of Cost drivers Cost Per Drivers No. Of Cost Drivers Total Cost Returned Check Cost 27,90,000.00 1,96,000.00 14.23 18,000.00 2,56,224.49 Checking Account reconcilation Cost 52,000.00 3,97,000.00 0.13 420 55.01 New account Setup 6,38,000.00 54,000.00 11.81 15,000.00 1,77,222.22 Capies of cancelled check 3,97,000.00 1,00,000.00 3.97 60,000.00 2,38,200.00 Online Banking Website maintenace cost account 1,88,000.00    1.00 1,88,000.00 1.00 1,88,000.00 Total Overhead Cost account 8,59,701.72 Annual NO. of Accounts 52,000.00 Overhead Cost Per Account                    16.53

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