Question

The operations vice president of Security Home Bank has been interested in investigating the efficiency of the bank's operations. She has been particularly concerned about the costs of handling 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 records of wages and other costs, there has been no attempt thus far to show how those costs are related to the various services provided by the bank. The operations vice president has asked your help In conducting an activity-based costing study of bank operations. In particular, she would like to know the cost of opening an account, the cost of processing deposits and withdrawals, and the cost of processing other customer transactions The Westfield branch of Security Home Bank has submitted the following cost data for last year: Teller wages Assistant branch manager salary Branch manager salary Total $ 143,000 71,000 88,000 $ 302,000 Virtually all other costs of the branch-rent, depreciation, utilities, and so on-are organization-sustaining costs that cannot be meaningfully assigned to individual customer transactions such as depositing checks. In addition to the cost data above, the employees of the Westfield branch have been interviewed concerning how their time was distributed last year across the activities included in the activity-based costing study. The results of those interviews appear below Distribution of Resource Consumption Across Activities Processing Processing Opening Deposit and Other Customer Accounts withdrawals Transactions Teller vage Other ativities Total 70

Answer 1

First stage allocation

	Opening accounts	Processing deposits and withdrawals	Processing other customer transaction	Other activities	Total
Teller wages	5720	104390	25740	7150	143000
Assistant branch manager's salary	11360	7100	17040	35500	71000
Branch manager's salary	3520	0	15840	68640	88000
Total	20600	111490	58620	111290	302000

Calculate activity rate

	Activity rate
Opening accounts	20600/180 = 114.44 per account opened
Processing deposits and withdrawals	111490/51000 = 2.19 per deposit and withdrawal
Processing other customer transaction	58620/1250 = 46.90 per other customer transaction