Red River Banking Company has ten automatic i) AND teller machines (ATMs) spread throughout the city maintained by the ATM Department. You have been assigned the task of determining the cost of operating each machine. Management will use the information you develop, along with other information pertaining to the volume and type of transactions at each machine, to evaluate the desirability of continuing to operate each machine and/or changing security arrangements for a particular machine.

The ATM Department consists of a total of six employees: a supervisor, a head cashier, two associate cashiers, and two maintenance personnel. The associate cashiers make between two and four daily trips to each machine to collect and replenish cash and to replenish supplies, deposit tickets, and so forth. Each machine contains a small computer that automatically summarizes and reports transactions to the head cashier. The head cashier reconciles the activities of the two associate cashiers to the computerized reports. The supervisor, who does not handle cash, reviews the reconciliation. When an automatic teller’s computer, a customer, or a cashier reports a problem, the two maintenance employees and one cashier are dispatched immediately. The cashier removes all cash and transaction records, and the maintenance employees repair the machine.

Maintenance employees spend all of their time on maintenance-related activities. The associate cashiers spend approximately 50 percent of their time on maintenance-related activities and 50 percent on daily trips. The head cashier’s time is divided, with 75 percent directly related to daily trips to each machine and 25 percent related to supervising cashiers on maintenance calls. The supervisor devotes 20 percent of the time to daily trips to each machine and 80 percent to the equal supervision of each employee. Cost information for a recent month follows:

Related monthly activity information for this month follows:

Additional information follows:
* The office is centrally located with about equal travel time to each machine.
* Maintenance hours include travel time.
* The cashiers’ service vehicle is used exclusively for routine visits.
* The office space is divided equally between the supervisor and the head cashier.
Required

a. Determine the monthly operating costs of machines 7 and 8 when cost assignments are based on the number of machines.

b. Determine the activity cost of a routine trip and a maintenance hour for the month given. Round answers to the nearest cent.

c. Determine the operating costs assigned and reassigned to machines 7 and 8 when activity-based costing is used.

d. How can ABC cost information be used by Red River Banking Company to improve the overall management of monthly operating costs?

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Salaries Supervisor.. Head cashier. Other ($1,800 each) Lease and operating costs $4,000 3,000 7,200 Cashiers' service vehicle 1,200 Maintenance service vehicle. 1,400 Office rent and utilities.... 2,300 Machine lease, space rent, and utilities ($1,500 each).. 15,000 Total.. $34,100