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 vages Assistant branch manager salary Branch manager salary $160,000 75,000 80,000 $315,000 Total Virtually all other costs of the branch-rent, depreclation, 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 aboe, the employees of the Westfield branch have been interviewed concening 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 Resouree Consanption Across Activities Processing Deposits and 0ther Customer withdrawals Processing Opening other Activitioes hecounts Transactione Totals

Answer 1

	Distribution of Resource Consumption Across Activities
	Opening Accounts	Processing Deposits and Withdrawals	Processing Other Customer Transactions	Other Activities	Totals
						Teller wages	$                             8,000 ($ 160,000 × 5%)	$                       1,04,000 ($ 160,000 × 65%)	$                           32,000 ($ 160,000 × 20%)	$                           16,000 ($ 160,000 × 10%)	$                       1,60,000
						Assistant branch manager salary	$                           11,250 ($ 75,000 × 15%)	$                             3,750 ($ 75,000 × 5%)	$                           22,500 ($ 75,000 × 30%)	$                           37,500 ($ 75,000 × 50%)	$                           75,000
						Branch manager salary	$                             4,000 ($ 80,000 × 5%)	$    0 ($ 80,000 × 0%)	$                             8,000 ($ 80,000 × 10%)	$                           68,000 ($ 80,000 × 85%)	$                           80,000
Total cost	$                           23,250	$                       1,07,750	$                           62,500	$                       1,21,500	$                       3,15,000

• Activity Based Costing is a costing technique wherein overhead costs are assigned to activities based on the resource consumption by each activity to form a cost pool. In this question cost pools are: Teller wages, Assistant branch manager salary and Branch manager salary.
• These activity costs are then allocated to each unit of product produced based on the activity used by the product/service
• Each activity will have an activity cost allocation rate. (in this question, given as %..