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 $ 155,000 Assistant branch manager salary 64,000 Branch manager salary 92,000 Total $ 311,000 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 Opening Accounts Processing Deposits and Withdrawals Processing Other Customer Transactions Other Activities Totals Teller wages 5 % 69 % 19 % 7 % 100 % Assistant branch manager salary 9 % 19 % 24 % 48 % 100 % Branch manager salary 5 % 0 % 23 % 72 % 100 % The manager of the Westfield branch of Security Home Bank has provided the following data concerning the transactions of the branch during the past year: Activity Total Activity at the Westfield Branch Opening accounts 195 new accounts opened Processing deposits and withdrawals 50,000 deposits and withdrawals processed Processing other customer transactions 1,150 other customer transactions processed Required: 1. Compute the activity rates for the activity-based costing system. (Round your answers to 2 decimal places.)

Answer 1

	Opening Accounts	Processing Deposits and Withdrawals	Processing Other Customer Transactions	Other Activities	Total
Teller wages	7750	106950	29450	10850	155000
Assistant branch manager salary	5760	12160	15360	30720	64000
Branch manager salary	4600	0	21160	66240	92000
Total	18110	119110	65970	107810	311000
Activity cost pool	Activity rate
Opening Accounts	92.87	per account opened	=18110/195
Processing Deposits and Withdrawals	2.38	per deposit or withdrawal	=119110/50000
Processing Other Customer Transactions	57.37	per Other Customer Transaction	=65970/1150