The Calgary branch of Southern Alberta Savings Bank (SASB) is a retail branch in a rapidly growing residential area. It services individuals and local businesses. To support its services, the branch employs 14 tellers, 3 retail sales managers (RSMs), and the branch managing officer. The branch services about 2,900 customers. Each of the 70 branches of SASB is implementing ABC in order to improve profitability. SASB’s branch managing officers have been given the responsibility to implement activity-based costing. The managing officer at the Calgary branch decided to implement an ABC system. The Calgary branch has the following cost data for the last year:

Teller wages ........................................................................$ 350,000
RSM salaries and benefits.....................................................210,000
Managing officer salary and benefits .................................100,000
Other bank costs ...................................................................430,000
Total ...................................................................................$1,090,000

The “other bank costs” include depreciation on the facility, including furniture, building, equipment, insurance, rentals of computers, contracted computer services, telecommunications, and utilities. These costs cannot be directly or indirectly related to routine bank activities, such as processing new accounts or processing deposits or withdrawals, and, thus, are unallocated. There are no costs that can be traced directly to customers so the Calgary branch has just two types of costs—indirect and unallocated. All employees have been interviewed as part of the ABC study. For example, tellers were asked how they spent their time. Three major activities were identified. They said that they spent most of their time (60 percent) processing deposits and withdrawals. They also estimated that they spent about 10 percent of their time processing new accounts and about 20 percent of their time processing other transactions. The remaining 10 percent of their time was spent on all other banking activities. The results of the interviews appear below.

These interviews and measurements of time allocations correspond to Step 3 of ABC implementations. The remaining calculations for Step 3 of SASB’s implementation trace all three payroll costs (teller, sales manager, and managing officer) to three activity centres: open new accounts, process deposits and withdrawals, and process transactions. The calculation of the “open new accounts” activity is as follows:

($350,000×0.10)+($210,000×0.10)=$56,000

Calculate the costs of the remaining two processing activities, for deposits and withdrawals and for other transactions.

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Internal All Other Process Process Process Activity Analysis Accounts Withdrawals Transactions Activities Other New Banking Total Deposits and Teller 10% 60% 20% 10% 100% wages Retail sales 10% 20% 30% 40% 100% manager salary Managing officer 0% 10% 30% 60% 100% salary