Chapter 5 Activity-Based Costing and ManagementProblem 5-57 Customers as a Cost ObjectMorrisom National Bank has requested an analysis of checking account profitability by custom-er type. Customers are categorized according to the size of their account: low balances, mediumbalances, and high balances. The activities associated with the three different customer catego-ries and their associated annual costs are as follows:Opening and closing accountsIssuing monthly statementsProcessing transactionsCustomer inquiries$ 300,000450,0003,075,0000000 Providing automatic teller machine (ATM) services600,000Total cost1,680,000$6,105,000Additional data concerning the usage of the activities by the various customers are alsoprovided:Account BalanceLowMediumHighNumber of accounts opened/closed22,5004,5003,000Number of statements issued675,000150,00075,000Processing transactions27,000,0003,000,000750,000Number of telephone minutes1,500,000900,000600,000Number of ATM transactions2,025,000300,00075,000Number of checking accounts57,00012,0006,000Required:(Note: Round answers to two decimal places.)1. Calculate a cost per account per year by dividing the total cost of processing andmaintaining checking accounts by the total number of accounts. What is the average feeper month that the bank should charge to cover the costs incurred because of checkingaccounts?2. Calculate a cost per account by customer category by using activity rates.3. Currently, the bank offers free checking to all of its customers. The interest revenues$90per account; however, the interest revenues earned per account by categoryaverageare $80, $100, and $165 for the low-, medium-, and high-balance accounts, respectively.Calculate the average profit per account (average revenue minus average cost fromRequirement 1). Then calculate the profit per account by using the revenue per customertype and the unit cost per customer type calculated in Requirement 2.

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Rock Solid Bank and Trust (RSB&T) offers only checking accounts. Customers can write checks and use a network of automated teller machines. RSB&T earns revenue by investing the money deposited; currently, it averages 6.30 percent annually on its investments of those deposits. To compete with larger banks, RSB&T pays depositors 0.50 percent on all deposits. A recent study classified the bank's annual operating costs into four activities. Activity Using ATM Visiting branch Processing transaction Managing functions Total overhead Cost Driver ATM uses Branch visits Number of transactions Average deposit Number of uses Number of visits Number of transactions Total deposits Data on two representative customers follow. Customer A Customer B 100 200 5 20 40 $6,000 1,500 $6,000 Driver Volume 4,200,000 uses 315,000 visits Cost $ 3,150,000 1,890,000 13,860,000 168,000,000 transactions 12,600,000 $787,500,000 in deposits $31,500,000 Required: a. Compute RSB&T's operating profits. b. Compute the…
Moorcroft's assistant controller suggested that Moorcroft hire a part time collector to encourage customers to pay more promptly and to reduce the amount of uncollectible accounts. Sales are still 40% cash and 60% credit but the assistant controller predicted that this would cause credit sales to be collected 30% in the month of the sale, 50% in the month following sale, and 18% in the second month following sale; 2% are uncollectible. Prepare a schedule of expected collections from customers for June. How did these changes impact cash collections? Moorcroft Company Schedule of Expected Collections from Customers Sales April May June $ 173420 $ 191400 $ i 86710 i $ 173420 299000 330000 398000 $ i 340500 $ 230840 99000 32292 202932
summarizing the transactions affecting the accounts receivable Credible Company provided the following T-account Problem 4-2 (IAA) for the current year: Accounts Receivable 600,000 Collections from customers 5,300.000 6,000,000 Writeoff Jan. 1 balance 35,000 Charge sales Shareholders' - subscriptions Deposit on contract Claims against common 40,000 Merchandise returns 200,000 Allowances to customer for shipping damages Collections on carrier claims 40,000 25,000 120,000 100,000 Collection on subscriptions 10,000 50,000 carrier for damages IOUS from employees Cash advance to affiliates 100,000 Advances to a supplier 50,000| Required: a. Compute the correct amount of accounts receivable. b. Prepare one compound entry to adjust the accounts receivable. c. Compute the amount to be presented as "trade and other receivables" under current assets. d. Indicate the classification and presentation of the other items.
Fred's Factory has credit sales of $747,500 and an average accounts receivable balance of $57,500. Fred factors his receivables throughout the year with his local bank at a 2% discount. What is the effective annual rate of this arrangement? Multiple Choice 27.88% 29.24% 28.67% 28.03% 30.04%
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Colleen Company has gathered the following data pertaining to activities it performed for two of its major customers. Number of orders Units per order Sales returns: Number of returns. Total units returned. Number of sales calls Activity Sales calls Order processing Deliveries Sales returns Sales salary Colleen sells its products at $200 per unit. The firm's gross margin ratio is 25%. Both Jerry and Kate pay their accounts promptly and no accounts receivable is over 30 days. After using business analytics software to carefully analyze the operating data for the past 30 months, the firm has determined the following activity costs: Required 1 Required 2 Jerry, Inc. Kate Co. 5 1,000 Customer unit level costs: Required: 1. Using customers as the cost objects, classify the activity costs into cost categories (unit-level, batch-level, etc.) and compute the total cost for Colleen Company to service Jerry, Inc. and Kate Co. 2. Compare the profitability of these two customers. Customer batch…
Bank Alfatih earned an annual profit amounting to USD1,500,000 through a Mudharaba Mutlaqah deposit account. The profit sharing ratio between the bank and the depositors of the Mudharaba deposit account is (40:60) respectively. The table below contains data on the deposit types that are available, average balance needed, and the weights that are used. Deposit Types Average balance Weights 1 month 300,000 0.5 3 months and less 400,000 0.8 6 months and less 600,000 1 12 months and less 800,000 1.25 Total 2,100,000 Calculate the total depositors’ share from the annual profit. Calculate the weighted average balance for each type of deposits.
You are a Corporate Credit Analyst for your bank. A new corporate customer in the manufacturing sector approached your bank for a large credit facility in the sum of $20 million for production equipment and warehousing. The customer submitted the following financials to you. List two strengths and two weaknesses of the borrower in relation to credit.
IBM had net sales of $81,741 and average accounts receivable of $8,712. Its competitor, Oracle, had net sales of $38,226 and average accounts receivables of $5,618. Calculate the accounts receivable turnover for both companies. IBM: Oracle: Which company is doing a better job of managing its accounts receivables?
Bassett Stores Company and Fox Stores Inc. are large retail department stores. Both companies offer credit to their customers through their own credit card operations. Information from the financial statements for both companies for two recent years is as follows (all numbers are in millions): Bassett Fox Merchandise sales $229,950 $321,200 Credit card receivables—beginning 37,356 66,625 Credit card receivables—ending 31,188 51,295 a. (1) Determine the accounts receivable turnover for both companies. Round to one decimal place. Bassett Stores fill in the blank 1 Fox Stores fill in the blank 2 (2) Determine the days' sales in receivables for both companies. Assume there are 365 days in the year. Round intermediate calculations to the nearest whole dollar and final answers to one decimal place. Bassett Stores fill in the blank 3 days Fox Stores fill in the blank 4 days b. What conclusion can be drawn regarding the two companies and…
Restaurant A serves lunch and dinner. It is open 5 days a week all year long. The total revenue for the past year was $1,000,000. The manager of Matt's Deli estimates that 52% of its revenue is provided by lunch service and the remainder by dinner service. Matt's has 50 seats, with a seat turnover rate of 7.3 for lunch and 4.8 for dinner. Determine the average check per meal for lunch. Select one: a. $237 b. $653 c. None of the available choices d. $333
A quality control activity analysis indicated the following four activity costs of a hotel. Verifying credit card information $40,000 Customer service training 20,000 Discounting room rates due to poor customer service 16,000 Correcting charges to customer invoices 8,000 Total $84,000 Sales are $750,000 for the year. Prepare a cost of quality report. Round your answers to one decimal place, if necessary. Due to rounding there may be difference of 0.1 Cost of Quality Report Quality CostClassification Quality Cost Percent of TotalQuality Cost Percent ofTotal Sales Prevention $fill in the blank 1 fill in the blank 2 % fill in the blank 3 % Appraisal fill in the blank 4 fill in the blank 5 fill in the blank 6 Internal failure fill in the blank 7 fill in the blank 8 fill in the blank 9 External failure fill in the blank 10 fill in the blank 11 fill in the blank 12 Totals $fill in the blank 13…

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