PROBLEM 6-13. Activity-Based Costing at a Service Company [LO 2] Tannhauser Financial is a banking services company that offers many different types of checking accounts. It has recently adopted an activity-based costing system to assign costs to various types of checking accounts. The following data relate to one type of checking account, the money market checking account, and the ABC cost pools: Problems 247 221,750 Total Number of Checking Accounts Number of Money Market Checking Accounts Checking account cost pools: 70,000 Cost Pool Cost Cost Driver $3,000,000 Returned check costs Checking account reconciliation costs New account setup Copies of cancelled checks 60,000 780,000 300,000 Number of returned checks Number of account reconciliation requests Number of new accounts Number of cancelled check copy requests Per product group (type of checking account) Web site maintenance (for online banking) Total checking account costs 225,000 $4,365,000 Annual activity information related to cost drivers: Cost Pool Cost Cost Driver $3,000,000 Returned check costs Checking account reconciliation costs New account setup Copies of cancelled checks 60,000 780,000 300,000 Number of returned checks Number of account reconciliation requests Number of new accounts Number of cancelled check copy requests Per product group (type of checking account) Web site maintenance (for online banking) Total checking account costs 225,000 $4,365,000 Annual activity information related to cost drivers: Money Market Checking Cost Pool All Products Returned checks Check reconciliation costs New accounts Cancelled check copy requests Web site costs 200,000 returned checks 3,000 checking account reconciliations 60,000 new accounts 80,000 cancelled check copy requests 10 types of checking accounts 18,000 420 20,000 50,000 1 REQUIRED a. Calculate the cost rate per cost driver activity for each of the five cost pools. Round to two decimal places. b. Calculate the total cost assigned to the money market checking account. Round to two decimal places. c. Suppose that Tannhauser Financial allocates overhead using the number of checking accounts as the allocation base and one cost pool. Determine the cost rate per checking account and the per account cost assigned to the money market checking account. Discuss the difference in cost allocations between this method and the activity-based costing approach