10-45. Resources Used versus Resources Supplies Berkeley Bank reports the following information about resources in two functions. Cost Driver Rate Cost Driver Volume Resources used: $ 0.01 per transaction $250 per account Process transactions 40,000,000 transactions Process accounts 950 accounts Resources supplied $625,000 $300,000 Process transactions Process accounts

10-45. Resources Used versus Resources Supplies Berkeley Bank reports the following information about resources in two functions. Cost Driver Rate Cost Driver Volume Resources used: $ 0.01 per transaction $250 per account Process transactions 40,000,000 transactions Process accounts 950 accounts Resources supplied $625,000 $300,000 Process transactions Process accounts

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 7CE: Golding Bank provided the following data about its resources and activities for its checking account...

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Golding Bank provided the following data about its resources and activities for its checking account process: Resources Activities Time per Unit Activity Driver Supervision $58,000 Processing accounts 0.20 hr. No. of accounts Phone and supplies 82,000 Issuing statements 0.10 hr. No. of statements Salaries 220,000 Processing transactions 0.05 hr. No. of transactions Computer 24,000 Answering customer inquiries 0.15 hr. No. of inquiries Total 384,000 Total check processinghours 24,000 (practical capacity) Required: 1. Calculate the capacity cost rate for the checking account process. Round your answer to the nearest cent.$fill in the blank 1 per hour 2. Calculate the activity rates for the four activities. Round your answers to the nearest cent. Processing accounts $fill in the blank 2 per account Issuing statements $fill in the…
Customers as a Cost Object Morrisom National Bank has requested an analysis of checking account profitability by customer type. Customers are categorized according to the size of their account: low balances, medium balances, and high balances. The activities associated with the three different customer categories and their associated annual costs are as follows: Additional data concerning the usage of the activities by the various customers are also provided: Required: (Note: Round answers to two decimal places.) 1. Calculate a cost per account per year by dividing the total cost of processing and maintaining checking accounts by the total number of accounts. What is the average fee per month that the bank should charge to cover the costs incurred because of checking accounts? 2. Calculate a cost per account by customer category by using activity rates. 3. Currently, the bank offers free checking to all of its customers. The interest revenues average 90 per account; however, the interest revenues earned per account by category are 80, 100, and 165 for the low-, medium-, and high-balance accounts, respectively. Calculate the average profit per account (average revenue minus average cost from Requirement 1). Then calculate the profit per account by using the revenue per customer type and the unit cost per customer type calculated in Requirement 2. 4. CONCEPTUAL CONNECTION After the analysis in Requirement 3, a vice president recommended eliminating the free checking feature for low-balance customers. The bank president expressed reluctance to do so, arguing that the low-balance customers more than made up for the loss through cross-sales. He presented a survey that showed that 50% of the customers would switch banks if a checking fee were imposed. Explain how you could verify the presidents argument by using ABC.
Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each agent is paid 28,000 per year and is able to process 4,000 purchase orders. Last year, 17,800 purchase orders were processed by the five agents. Required: 1. Calculate the activity rate per purchase order. 2. Calculate, in terms of purchase orders, the: a. total activity availability b. unused capacity 3. Calculate the dollar cost of: a. total activity availability b. unused capacity 4. Express total activity availability in terms of activity capacity used and unused capacity. 5. What if one of the purchasing agents agreed to work half time for 14,000? How many purchase orders could be processed by four and a half purchasing agents? What would unused capacity be in purchase orders?
Blue-Pool Company is an electric utility which has two service departments, Accounting and Maintenance. It also has two operating departments, Generation and Transmission. Maintenance Department costs are allocated based on maintenance hours of service. Accounting Department costs are allocated based on accounting hours of service provided. Budgeting costs and other data for the following year are as follows: Accounting Maintenance Generation Transmission Budgeted costs R100 000 R200 000 R600 000 R400 000 Maintenance hours of service 600 7 200 4 800 Accounting hours of service 500 2 000 4 500 3 500 The step method is used to allocate service department costs, with the accounting department being allocated first. Calculate the amount of accounting department costs that needs to be allocated to the generation department. A. R42 860 B. R38 000 C. R57 143 D. R45…
The following cost allocation information is available for Moving Motors Ltd: Production departments Service departments A B Stores Maintenance Total Allocated costs R105 000 R196 500 R37 800 R50 700 R390 000 Service department usage - Stores 50% 40% - 10% - Maintenance 60% 15% 25% - If Moving Motors Ltd uses the simultaneous equation method of allocation, and Production Department A’s overhead recovery rate is R4.15 per machine hour, then the budgeted machine hours for Production Department A are (rounded): a. 43 003 machine hours b. 39 518 machine hours c. 40 000 machine hours d. 39 617 machine hours e. 43 080 machine hours
Calculating ABC Unit Costs Perkins National Bank has collected the following information for four activities and two types of credit cards: Activity Driver Classic Gold Activity Rate ($) Processing transactions Transactions processed 12,000 7,200 0.20 Preparing statements Number of statements 12,000 7,200 0.95 Answering questions Number of calls 24,000 36,000 4.00 Providing ATMs ATM transactions 48,000 14,400 1.50 There are 5,000 holders of Classic cards and 21,000 holders of the Gold cards. Required: Calculate the unit cost (rounded to the nearest cent) for Classic and Gold credit cards. Unit cost for Classic $fill in the blank 1 Unit cost for Gold $fill in the blank 2
Calculating ABC Unit Costs Perkins National Bank has collected the following information for four activities and two types of credit cards: Activity Driver Classic Gold Activity Rate ($) Processing transactions Transactions processed 12,000 7,200 0.20 Preparing statements Number of statements 12,000 7,200 0.95 Answering questions Number of calls 24,000 36,000 4.00 Providing ATMs ATM transactions 48,000 14,400 1.50 There are 4,700 holders of Classic cards and 19,900 holders of the Gold cards. Required: Calculate the unit cost (rounded to the nearest cent) for Classic and Gold credit cards. Unit cost for Classic Unit cost for Gold
Carbon Company provides the following information about resources. Unused Resources Capacity Cost Driver Volume Resources used Materials $ 2,500 10,000 pounds Energy 5,750 360 machine-hours Setups 0 89 setups Purchasing 4,000 90 purchase orders Customer service 7,900 70 returns Long-term labor 4,150 350 labor-hours Administrative 4,880 440 labor-hours Resources supplied Materials $ 122,500 Energy 21,950 Setups 24,920 Purchasing 26,500 Customer service 20,500 Long-term labor 29,700 Administrative 28,200 Sales revenue for Carbon Company is $590,000. Required: a. Prepare a traditional income statement.b. Prepare an activity-based income statement.
Management Accounting Company B is interested in using the reciprocal allocation method. The following data from operations were collected for analysis: Budgeted manufacturing overhead costs: Plant Maintenance PM (Support Dept) $350,000 Data Processing DP (Support Dept) $75,000 Machining M (Operating Dept) $225,000 Capping C (Operating Dept) $125,000 Services furnished: By Plant Maintenance (budgeted labour-hours): to Data Processing 3,500 to Machining 5,000 to Capping 8,200 By Data Processing (budgeted computer time): to Plant Maintenance 600 to Machining 3,500 to Capping 600 Required : a. What is the complete reciprocated cost of the Plant Maintenance Department? b. What is the complete reciprocated cost of the Data Processing Department? c. "The direct allocation method incorporates mutual services provided among all support departments."…
The centralized computer technology department of Lee Company has expenses of$264,000. The department has provided a total of 2,500 hours of service for the period. TheRetail Division has used 1,125 hours of computer technology service during the period, andthe Commercial Division has used 1,375 hours of computer technology service. How mucheach division should be charged for computer technology department services?
Carbon Company provides the following information about resources. Unused Resources Capacity Cost Driver Volume Resources used Materials $ 2,100 9,000 pounds Energy 3,490 390 machine-hours Setups 0 81 setups Purchasing 3,700 90 purchase orders Customer service 4,000 90 returns Long-term labor 4,800 340 labor-hours Administrative 8,820 440 labor-hours Resources supplied Materials $ 101,100 Energy 21,430 Setups 24,300 Purchasing 26,200 Customer service 17,500 Long-term labor 30,300 Administrative 31,700 Sales revenue for Carbon Company is $550,000. Required: A. Prepare a traditional income statement. Traditional Income Statement Total costs B. Prepare an activity-based income statement.…
State Financial Corp. has three service departments (Administration, Communications, and Facilities), and two production departments (Deposits and Loans). A summary of costs and other data for each department prior to allocation of service department costs for the year ended December 31 follows. Administration Communications Facilities Deposits Loans Direct costs $ 210,000 $ 320,000 $ 253,000 $ 7,590,000 $ 5,400,000 Employee hours 21,000 31,000 21,000 416,000 357,000 Number of employees 8 17 7 190 160 Square footage occupied 4,600 14,500 5,200 246,900 202,900 The costs of the service departments are allocated on the following bases: Administration, employee-hours; Communications, number of employees; and Facilities, square footage occupied. Required: a. Assume that the bank elects to distribute service department costs to production departments using the direct method. What amount of…