The operations vice president of First Bank of Eagle Kristin

The operations vice president of First Bank of Eagle, Kristin Wu, has been interested in investigating the efficiency of the bank\'s operations. She has been particularly conoerned about the costs of handing routine transactions at the bank and would like to compare these costs at the bank\'s various branches. if the branches with the most efficient operations can be identified, their methods can be studied and then replicated elsewhere. While the bank maintains meticulous reoords of wages and other costs, there has been no attempt thus for to show how those oosts are related to the various services provided by the bank Ms. Wu has asked your help in conducting an activity-based costng study of bank operations. In particular she would like to know the cost of opening an account, the cost of processing deposits and withdrswals, and the oost of processing other customer transactions The Avon branch of First Bank of Eagle has submitted the following cost data for last year Teller wages Assistant branch manager salary Branch manager salary $152.000 74,000 88.000 Total $312,000 Virtually all of the other costs of the branchrent deprecistion, ublities, and so on-are organizston- sustaining costs that cannot be meaningfully assigned to individual customer transactions such as depositing checks In addition to the cost dats above, the employees of the Avon branch have been interviewed concerning how their time was distributed last year across the activities included in the activity based costng stud The results of those interviews appear below Deposit. Customer, Aeroes . 100% Openingand TransactionsAcivities 7% 47% 82% Withdrawals Teler wages Assistant branch manager salery Branch manager salary 0% 15% 10% 1736 100% 100% 18% The manager of the Avon branch of First Bank of Esgle has provided the following dsta concerning the transactions of the branch during the pasf year Total Activity at the Avon Branch etmem Opening accounts Processing deposits and withörawals58.000 deposits and withdrawais Processing other customer transactions 220 accounts opened 900 other customer transactions Required 1. Compute the activity retes for the activity-based oosting system (Round your answers to 2 decimal places ) Cost Pool Activity Opening accounts Processing deposits and wthdrawals Processing otner customer transactions per aocount opened deppsit or withcrawal per other customer transaction

Solution

Allocation of overhead :

1) Calculate activity rate :

	Opening accounts	Processing deposits and withdrawal	Processing other customer transaction	Other activities	Total
Teller wages	0	112480	28880	10640	152000
Assitant branch manager salary	11100	12580	15540	34780	74000
Branch manager salary	0	0	15480	70520	86000
Total	11100	125060	59900	115940	312000