Chapter 4 BEX BEX.04.07

Simplifying the ABC System: TDABC Golding Bank provided the following data about its resources and activities for its checking account process: Time per Unit of Activity Traditional Interest-Bearing Account Account Resources Activities Driver Supervision No. of accounts 1,000 $70,000 Processing accounts 90,000 Issuing statements 0.20 he 0.10 hr. 2,000 50,000 Phone and supplies No. of statements 10,000 Salaries 275,000 Processing transactions No. of transactions 0.05 hr. 160.000 120,000 Computer 25,000 Answering customer inquiries No. of Inquiries 0.15 h 1,500 1,500 Tatal $460,000 At practical capacity, Golding uses 25,000 check processing hours, Required: 1. Calculate the capacity cost rate for the checking account process. Round your answers to the nearest cent. $ 18.4 per hour Calculate the activity rates for the four activities. Round your answers to the nearest cent Processing accounts 3.68 per account Issuing statements $ 1.84 per statement Processing transactions $ 0.92 per transaction Answering inquiries $ 2.76 per inquiry 2. Assuming there are 2,000 interest-bearing checking accounts, calculate the cost per account using the activity rates from Requirement 1. Round your answers to the nearest cent. Unit costs 3.69 X 3. A time equation is used to assign resource costs to checking accounts. Select a time equation for the interest-bearing checking account product. 0.20( number of accounts) + 0.10 number of statements) + 0.05(number of transactions) + 0.15(number of inquiries) Again, assuming that there are 2,000 interest bearing accounts, show that the resource cost per account is the same as calculated in Requirement 2. Round your answers to the nearest cent. 3.68 X 4. What if process improvements decreased the number of customer inquiries, leading to a 10 percent reduction in check processing hours and a $10,000 reduction in total resource costs? Calculate the capacity cast rate for the checking account process. 20 per hour Update all the activity rates for these changes in operating conditions, Processing accounts 4 per account Issuing statements 2 per statement Processing transactions $ 1 per transaction Answering inquiries $ 3 per inquiry