Question

EXERCISE 7-7 First-Stage Allocations L07-20 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 relate s 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 $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 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:

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Date Page ) Allocation based on activity costing Tot al Opening Pzousing Proossing Poroassing e Other" &uithdeaw Customer Hransaltion Other ALount deposik activity Telles wages t60000 8000 1G0O00XS) (160 107000 32000 16000 )(100000X20) (160000 x10%.) Asst Boanih 75000 11250 3750 2500 37500 Par00 (750o X15%) 5000X30) manager sal A5000XSON (7500XS) Brareh 68000 8000 4000 80000 mgre salary 8oc0ox Sx)2OD00XD)000x10)(80000X 852) Total Cost 315000230so 107750 Ga500 12150o