The Cedar Park branch of Austin State Savings Bank (ASSB) 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 3,000 customers. Each of the 70 branches of ASSB is implementing ABC in order to improve profitability. ASSB's branch managing officers have been given the responsibility to implement activity-based costing. The managing officer at the Cedar Park branch decided to implement a two-stage ABC system. The following process map depicts its two-stage ABC system.

Tellers - $370,000 Retail Sales Managers - $220,000 Managing Officer - $120,000 Others - $400,000

The results of the ABC study are summarized in the "Internal Activity Analysis

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%) processing deposits and withdrawals. They also estimated that they spent about 5% of their time processing new accounts and about 15% of their time processing other transactions. The remaining 20% of their time was spent on all other banking activities. The results of the interviews are presented in the following table:

	Internal Activity Analysis
		Process		All Other
	Open New	Deposits and	Process Other	Banking
	Accounts	Withdrawals	Transactions	Activities	Total
Teller wages	5%	60%	15%	20%	100%
Retail sales	20%	10%	20%	50%	100%
manager salary
Managing officer	0%	5%	35%	60%	100%
salary

The Cedar Park branch has the following cost data for the last year.

Teller wages	$360,000
RSM salaries and benefits	280,000
Managing officer salary and benefits	170,000
Other bank costs	490,000
Total	$1,280,000

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

Cedar Park branch has just two types of costs—indirect and unallocated.

Cedar Park branch of Austin State Savings Bank (ASSB) was identifying potential cost drivers for each major activity. The following cost drivers were chosen because they were both plausible and reliable and data were available:

Activity	Cost Driver	Annual Flow of Cost Driver
Process new accounts	Number of new accounts	550
Process deposits and withdrawals	Number of deposits and	156,000
	withdrawals
Process other transactions	Number of other transactions	53,000

Activity	Resource	Allocated cost
Open new accounts	Tellers	$18,500
	Retail sales managers	50,000
Total traceable cost		$68,500

Activity	Resource	Allocated cost
Process deposits	Tellers	$222,000
and withdrawals	Retail sales managers	25,000
	Managing officers	8,500
Total traceable cost		$255,500

Activity	Resource	Allocated cost
Process other	Tellers	$55,500
transactions	Retail sales managers	50,000
	Managing officers	59,500
Total traceable cost		$165,000

Of the 3,000 customers of the branch, only 300 are local businesses. The business-customer class generated 50 new accounts, 83,000 deposits and withdrawals, and 25,000 other transactions. The implementation of ABC at all branches of ASSB provided sufficient data for internal benchmarking. The following are the lowest activity costs among all branches implementing two-stage ABC systems:

Activity		Lowest Activity Cost per Driver Unit
Open new account		$102.52 per new account
Process deposits and withdrawals		$0.89 per deposit or withdrawal
Process other transactions		$2.83 per transaction
Customer Class		Lowest Customer Cost per Account
Retail			$85.40
Commercial			$677.62

Requirement 1. Determine the allocated (indirect) cost per account for retail and commercial accounts. Use the process map as a guide. Begin by calculating the cost per unit for each of the three main activities. First enter the formula, then calculate the cost per unit. (Round your answers to four decimal places.)

New accounts

$68,500

/

550

=

$124.5455

Deposits and withdrawals

$255,500

/

156,000

=

$1.6378

Other transactions

$165,000

/

53,000

=

$3.1132

Next, compute the total account cost for each customer class.(Round your answers to the nearest whole dollar.)

		Retail
New accounts	=
Process deposits and withdrawals	=
Process other transactions	=
Total cost

How do you find the New Accounts, Process deposits and withdrawals, Process other Transactions, and Total Cost for RETAIL and COMMERCIAL?

Answer rating: 100% (QA)

For the Retail customer class you need to find the total cost for each of the three activities New A... View the full answer