ABC Costing for a Service Organization Fairfield Mortgage Company is a full-service residential mortgage company in...

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ABC Costing for a Service Organization Fairfield Mortgage Company is a full-service residential mortgage company in the Atlanta area that operates in a very competitive market. The CEO, Richard Sissom, is concerned about operating costs associated with processing mortgage applications and has decided to install an ABC costing system to help him get a handle on costs. Although labor hours seem to be the primary driver of the cost of processing a new mortgage, the labor cost for the different activities involved in processing new loans varies widely. The Accounting Department has provided the following data for the company's five major cost pools for the year. Activity Cost Pools Activity Drivers Taking customer applications $360,000 Time-assistant managers 12,000 hours Time-credit managers 16,500 hours 630,000 Time-Underwriting Department 10,000 hours 240,000 Conducting credit investigations Underwriting 540,000 Preparing loan packages Closing loans Time-Processing Department 8,000 hours 720,000 Time-Legal Department hours $2,490,000 6,000 hours 52,500 hours During the year, the company processed and issued 5,000 new mortgages, two of which are summarized here with regard to activities used to process the mortgages: Application processing hours Credit Investigating hours Underwriting hours Processing hours Legal processing hours Total hours Loan 5066 Loan 5429 1.5 2.75 4 3 2.5 4.75 3.5 3 1.5 1.5 13.00 15.00 a. Determine the cost per unit of activity for each activity cost pool. Round rates to two decimal places. Activity-based overhead rates: Taking applications $ 0 Conducting credit Investigations $ 0 Underwriting $ 0 Preparing loan packages $ 0 Closing loans 0 b. Determine the cost of processing loans 5066 and 5429. Pound answers to two decimal places. ABC Costing for a Service Organization Fairfield Mortgage Company is a full-service residential mortgage company in the Atlanta area that operates in a very competitive market. The CEO, Richard Sissom, is concerned about operating costs associated with processing mortgage applications and has decided to install an ABC costing system to help him get a handle on costs. Although labor hours seem to be the primary driver of the cost of processing a new mortgage, the labor cost for the different activities involved in processing new loans varies widely. The Accounting Department has provided the following data for the company's five major cost pools for the year. Activity Cost Pools Activity Drivers Taking customer applications $360,000 Time-assistant managers 12,000 hours Time-credit managers 16,500 hours 630,000 Time-Underwriting Department 10,000 hours 240,000 Conducting credit investigations Underwriting 540,000 Preparing loan packages Closing loans Time-Processing Department 8,000 hours 720,000 Time-Legal Department hours $2,490,000 6,000 hours 52,500 hours During the year, the company processed and issued 5,000 new mortgages, two of which are summarized here with regard to activities used to process the mortgages: Application processing hours Credit Investigating hours Underwriting hours Processing hours Legal processing hours Total hours Loan 5066 Loan 5429 1.5 2.75 4 3 2.5 4.75 3.5 3 1.5 1.5 13.00 15.00 a. Determine the cost per unit of activity for each activity cost pool. Round rates to two decimal places. Activity-based overhead rates: Taking applications $ 0 Conducting credit Investigations $ 0 Underwriting $ 0 Preparing loan packages $ 0 Closing loans 0 b. Determine the cost of processing loans 5066 and 5429. Pound answers to two decimal places.