Computing and Interpreting Activity Rates
(This exercise is a continuation of Exercise 7-7; it should be assigned only if Exercise 7-7 is also assigned.)The manager of the Avon branch of First Bank of Eagle has provided the following data concerning the transactions of the branch during the past year:
Activity | Total Activity at the Avon Branch | |
Opening accounts | 200 | accounts opened |
Processing deposits and withdrawals | 50,000 | deposits and withdrawals |
Processing other customer transactions | 1,000 | other customer transactions |
The lowest costs reported by other branches for these activities are displayed below:
Activity | Lowest Cost among All First Bank of Eagle. Branches | |
Opening accounts | $24.35 | per account opened |
Processing deposits and withdrawals | $2.72 | per deposit or withdrawal |
Processing other customer transactions | $48.90 | per other customer transaction |
Required:
1. Using the first-stage allocation from Exercise 7-7 and the above data, compute the activity rates for the activity-based costing system. (Use Exhibit 7-6 as a guide.) Round all computations to the nearest whole cent.
2. What do these results suggest to you concerning operation at the Avon branch?
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