A part of the activity analysis conducted at the Maple Lake branch of Buffalo State Savings Bank (BSSB) was identifying potential cost drivers for each major activity. The following cost drivers were chosen because they were both plausible and reliable and data were available:

Of the 3,100 customers of the branch, only 400 are local businesses. The business-customer class generated 20 new accounts, 89,000 deposits and withdrawals, and 22,000 other transactions. The implementation of ABC at all branches of BSSB provided sufficient data for internal benchmarking. The following are the lowest activity costs among all branches implementing two-stage ABC systems:

Activity Lowest …………………………… Activity Cost per Driver Unit

Open new accounts ………………………… $204.73 per new account

Process deposits and withdrawals … $ 2.25 per deposit or withdrawal

Process other transactions …………………….. $ 3.83 per transaction

Customer Class … Lowest Customer Cost per Account

Retail ………………………………….. $126.85

Commercial …………………………… $593.83

1. Determine the allocated (indirect) cost per account for retail and commercial accounts. Use Exhibit 4-18 as a guide.

2. Under what conditions would benchmarking between the Maple Lake branch of BSSB and the other branches be inappropriate?

3. What do the results of the ABC study suggest?

Transcribed Image Text:

Activity Process new accounts Process deposits and withdrawals Nuberof deposits and Cost Driver Annual Flow of Cost Driver Number of new accounts 580 166,000 withdrawals Process other transactions Number of other transactions 46,000