Question: Silver Springs Bank is a local bank located in a

Silver Springs Bank is a local bank located in a residential area, and it services mostly individuals and local businesses. Silver Springs’ four main services are transaction processing (withdrawals, checks, currency exchange), loans, simple investments (individual clients), and complex investments (portfolios of large businesses).
To support these activities, Silver Springs employs 10 front-office staff, 12 back-office staff dealing with loan applications and investments, and 2 people to consult with customers and manage complex portfolio investments. A team of 3 supervisors manages the overall operations of the bank. As part of Silver Springs’ implementation of activity-based costing, it needed to identify activities, resources, and cost drivers. The following table summarizes the cost-allocation bases Silver Springs has chosen for its activities and resources:

Cost-Allocation Base
number of investments
number of applications
number of loans
number of person hours
number of minutes
number of computer transactions
number of square feet
number of loan inquiries
number of transactions
number of schedules
number of securities

For each of the brief descriptions that follows, indicate whether it is an activity (A) or a resource (R). For each activity or resource, choose the most appropriate cost-allocation base from the preceding list and indicate for each resource whether it is a fixed-cost (F) or variable-cost (V) resource. The first item is completed as a guide.
a. Contract maintenance of building (R; number of square feet; F)
b. Staff for front-line customer service
c. External computing services
d. Development of repayment schedules
e. Staff for consulting with customers and arranging the portfolios
f. External service bureau providing customer credit checks for loan applications
g. Preparing investment documents for customers
h. Research to evaluate a loan application
i. Overtime by back-office staff
j. Telephones/facsimile
k. Staff for service and background research
l. Establish customer collateral for approved loans

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  • CreatedNovember 19, 2014
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