Data Processors perform credit card services for banks. The company uses an ABC system. Following is information for the past year:

The following questions will help you analyze the information for this problem. Do not turn in your answers to these questions unless your professor asks you to do so.
A. Using standard values for costs and activity, calculate an ABC allocation rate for each activity.
B. Prepare an operating cost statement for Data Processors that compare the static budget, the flexible budget, and actual costs.
C. Calculate the spending variance for the cost of processing transactions. D. Suppose the costs for processing transactions include some fixed and some variable costs, as shown:

Given this new information, calculate spending variances for the cost of processing transactions.
E. Discuss possible reasons for the variances calculated in part (D).

The CEO and CFO of Data Processors want your opinion about whether and how ABC variance information should be used in departmental manager performance evaluations. Turn in your answer to the following.
F. Use the information you learned from the preceding analyses to write a memo to the CEO and CFO presenting your evaluation of (1) whether the use of ABC cost variances in departmental manager performance evaluations would likely improve organizational performance, and (2) which spending variance—the one from part (C) or part (D)—would provide better information for evaluating the credit card transaction processing manager’s ability to control costs. As you write the memo, consider what information the CEO and CFO will need from you to help them make a finaldecision.

  • CreatedJanuary 26, 2015
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