managerial accounting 4 niDDewa Kiver Banking Lompariv nas t

managerial accounting

4. niDDewa Kiver Banking Lompariv nas ten automatic teller macnines i citv maintained by the ATM Department. You have the ta eacn macnine. Management will use tne intormation v pertaining to the voiume and tvpe of transactions at each machine, to evaluate rontinuine to onerate each machine and/or chaneing securitv arraneements tor a particular sk of determinine the cost of operating otner inrormation ou geveiop, aiong witn the desirability of machine ne AIm vepartment consists or six empioyees: a supervisor, a neao and two maintenance personnel. The ATM department is responsibie for two m trips to restock tne macnines, ana maintenance or tne macnines. the a casnie r, two associate casiers, associate casniers make four daily trips to each machine to collect and replenish cash and to replenish atea witn tnese aairy tops are ariven by tne numoer or trips maae. wnen a suppies. Losts associ em is reported, the two maintenance employees and one cashier are dispatched immediately casnier removes al casn ana transaction recoras, ana the maintenance empioyees repair tne machine Maintenance empioyees spena aul or tneir time on maintenance reiatea activities. ine associate cashiers spend approximately 50 percent of their time on maintenance-related activities and 50 percent on aaly trips. ine neaa casnier s time is arviaea, witn7s percent airectry reiatea to aairy rips to each machine and 25 percent related to supervising cashiers on maintenance calls. The supervisor aevotes 20 percent or tne time to aairy trips to eacn macnine ana 8u percent to tne equai supervision of each emplovee. One third of the office space (and associated utilities) is used for maintenance activities, the remainaer or the orrice space is accommoaates the routine daily tips. in a normal month, the ATM department makes 720 routine daily trips, and logs 160 maintenance hours. Cost information for a recent month follows: e. Costs associated with maintenance activities are driven by maintenance hours. Salaries Supervisor Head cashier Associate cashiers ($1,800 each) Maintenance personnel ($1,800 each) 4,200 3,600 3,600 Lease and operating costs Cashiers\' service vehicle Maintenance service vehicle Office rent and utilities Machine lease and utilities ($1,500 per ATM) 1,400 2,500 15,000 34,800 Related actual activity information for this month follows: Routine Maintenance Machine number hours trips 90 120 25 8 onthly operating costs of machines 7 and 8 when overhead costs are distributed evenly between the ATM machines. Parts b- e will step through calculating the monthly operating costs of machines 7 and 8 when using activity based costing b. Identify which of the costs in the table above are overhead costs, and which are direct (can be traced easily to each ATM). c. Assign the overhead costs to the two identified activities (routine daily trips and maintenance Hint: some of the overhead costs in the table above are split between the two activities. For those costs, use the time and other information given above to assign costs between activities. Determine the activity cost overhead rates for the activities. Round answers to the nearest cent. o d.

Solution

Requirement 1 When overhead costs are distributed evenly to ATM machines = Total Overhead costs/No. of machines = $34800/10 = $3480 Per machine Requirement 2 Activity Based Costing Total costs % Routine Trips % Maintenance Machine lease, space rent and utilities Supervisor Salary 4200 20 840 80 3360 Head Cashier Salary 3000 75 2250 25 750 Associate\'s Cashier salary 3600 50 1800 50 1800 Maintenance worker\'s salary 3600 0 100 3600 Cashier\'s Service vehicle used for round trip 1500 100 1500 0 Maintenance service vehicles used for maintenance 1400 0 100 1400 Office rent and utilities used equally 2500 50 1250 50 1250 Machine lease, space rent and utilities 15000 100% 15000 Total per activity 7640 12160 Quanity of activity 720 160 Unit activity rates 10.61 76 Determination of operating cost assigned to each machine Machine No. of round trips/Activity No. Round trips Maintenance hours/Activity No. Maintenace equally Machine lease, space rent and utilities Total 7 90 955.00 25 1900 equally 1500 4355.00 8 120 1273.33 5 380 equally 1500 3153.33 Total 2228.3 2280 3000 7508.3