Question

EXERCISE 7-7 First-Stage Allocations L07-2 The operations vice president of Security Home Bank has been interested in investis efficiency of the bank's operations. She has been particularly concerned about the costs o routine transactions at the bank and would like to compare these costs at the bar branches. If the branches with the most efficient operations can be identified, their meu studied and then replicated elsewhere. While the bank maintains meticulous records of was other costs, there has been no attempt thus far to show how those costs are related to the variou services provided by the bank. The operations vice president has asked your help in conduct an activity-based costing study of bank operations. In particular, she would like to know the of opening an account, the cost of processing deposits and withdrawals, and the cost of process other customer transactions. The Westfield branch of Security Home Bank has submitted the following cost data for last year: has been interested in investigating the articularly concerned about the costs of handling ke to compare these costs at the bank's various operations can be identified, their methods can be ntains meticulous records of wages and Teller wages Assistant branch manager salary .......... Branch manager salary ..... Total ..... $160,000 75,000 80,000 $315,000 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 inter- viewed 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 Opening Deposits and Accounts Withdrawals Processing Other Customer Other Transactions Activities 20% 10% 30% 50% 10% 85% Total Teller wages .......... Assistant branch manager salary .... Branch manager salary............. 5% 15% 65% 5% 0% 100% 100% 100% 5%

prepare the first stage allocation forbthe activity based costing study.

Answer 1

Solution

Costs	Opening Accounts	Processing Deposits & Withdrawals	Processing other customer transactions	Other activities
Teller Wages	$               8,000.00	$   104,000.00	$            32,000.00	$    16,000.00
Assistant Branch manager Salary	$             11,250.00	$        3,750.00	$            22,500.00	$    37,500.00
Branch manager Salary	$               4,000.00	$                     -	$               8,000.00	$    68,000.00
Total	$             23,250.00	$   107,750.00	$            62,500.00	$ 121,500.00

Working

	Working
Working	Overhead costs	Costs	Opening Accounts	Processing Deposits & Withdrawals	Processing other customer transactions	Other activities
A	Teller Wages	$          160,000.00	5%	65%	20%	10%
B= $160000 x A			$            8,000.00	$ 104,000.00	$         32,000.00	$         16,000.00
C	Assistant Branch manager Salary	$            75,000.00	15%	5%	30%	50%
D = $75000 x C			$          11,250.00	$       3,750.00	$         22,500.00	$         37,500.00
E	Branch manager Salary	$            80,000.00	5%	0%	10%	85%
F = $80000 x E			$            4,000.00	$                    -	$            8,000.00	$         68,000.00
B+D+F	Total	$          315,000.00	$          23,250.00	$ 107,750.00	$         62,500.00	$      121,500.00