Question

Assigning Cost of Resources to Activities, Unbundling the General Ledger Golding Bank provided the following data about its resources and activities for its checking account process: Resources Activities Clerical Hours Supervision Processing accounts 10,000 $70,000 90,000 Phone and supplies Issuing statements 5,000 Salaries 275,000 Processing transactions 7,000 Computer 25,000 Answering customer inquiries 3,000 Total $460,000 Total 25,000 • Computers are used only by the issuing (30 percent) and processing transaction (70 percent) activities. • Phone and supplies are 60 percent customer inquiries with the other 40 percent divided equally among the remaining activities, including supervising the checking operation. • The supervisor spends 100 percent of his time on supervision. In addition to the 25,000 clerical hours, there are 2,000 hours of supervision used (the hours used by the supervising clerks activity, which is not listed above). Required: 1. Prepare a work distribution matrix for the five primary activities. If an answer is zero, enter "O". Golding Bank Percentage of Time on Each Activity Activity Supervisor Clerks Supervising clerks Processing accounts Issuing statements Processing transactions Answering customer inquiries 2. Calculate the cost of each activity. Activity Total Supervising clerks Processing accounts Issuing statements Processing transactions Answering customer inquiries 3. If the cost of the supervising activity is assigned to the other four activities, what is the final cost of these four primary activities? Processing accounts Issuing statements Processing transactions Answering customer inquiries

Answer 1

Clerks 1) Golding Bank Percentage of Time on Each Activity Activity Supervisor Supervising clerks Processing counts Issuing statements Processing transactions Answering customer inquires 100% 40% 20% 28% 12% Working Notes: Supervision hours Used for supervisor only 2,000 (2,000 / 2,000) 100% Clerical hours Processing counts (10,000 / 25,000) Issuing statements (5,000 / 25,000) Processing transactions (7,000 / 25,000) Answering customer inquires (3,000 / 25,000) 25,000 40% 20% 28% 12%

2) Cost of each activity Activity Supervising clerks Processing counts Issuing statements Processing transactions Answering customer inquires Working Notes: Total $ $ $ $ $ 79,000 119,000 71.500 103,500 87.000 Supervising clerks Processing counts Issuing statements Processing transactions Answering customer inquires Total Phone and Supplies Customer inquires (90,000 x 60%) Allocation of other equally (90,000 x 40%) Remaining total number of activity Allocation of cost equally (36,000 /4) Phone and Supervision supplies Salaries $ 70,000 $ 9,000 $ - 9,000 110,000 - L 9.000 55.000 9,000 77,000 54,000 33,000 70,000 $ 90,000 $ 275,000 90,000 54,000 36,000 Computer Total - $ 79,000 - 119,000 7.500 71.500 | 17,500 103,500 87,000 $ 25,000 $ 460,000 9,000 Salaries $ 275,000 Allocated to the clerical activity based on the distribution matrix Processing counts (275,000 x 40%) $ 110,000 Issuing statements (275,000 ~ 20%) $ 55,000 Processing transactions (275,000 x 28%) $ 77,000 Answering customer inquires (275,000 x 12%) $ 33,000 Computer Issuing statements (25,000 ~ 30%) Processing transaction (25,000 x 70%) $ $ 25,000 7,500 17,500

3) $ Processing counts Issuing statements Processing transactions Answering customer inquires 150,600 87,300 125,620 96,480 $ Working Notes: Processing counts Issuing statements Processing transactions Answering customer inquires Supervising Before Allocation cost Total Cost (A) (B) (A + B) $ 119,000$ 31,600 $ 150,600 71,500 15,800 87,300 103,500 22,120 125,620 87,000 9,480 96,480 Allocation of Supervising cost based on distribution Matrix Supervising cost 79,000 Processing counts (79,000 x 40%) $ 31,600 Issuing statements (79,000 < 20%) 15,800 Processing transactions (79,000 ~ 28%) $ 22,120 Answering customer inquires (79,000 x 12%) $ 9,480