Problem 2-19A (Algo) Context-sensitive nature of cost behavior classifications LO 2-1 Vernon Bank's start-up division establishes new branch banks. Each branch opens with three tellers. Total teller cost per branch is $96,000 per year. The three tellers combined can process up to 85,000 customer transactions per year. If a branch does not attain a volume of at least 55,000 transactions during its first year of operations, it is closed. If the demand for services exceeds 85,000 transactions, an additional teller is hired and the branch is transferred from the start-up division to regular operations. Required a. What is the relevant range of activity for new branch banks? b. Determine the amount of teller cost in total and the average teller cost per transaction for a branch that processes 55,000, 65,000, 75,000, or 85,000 transactions. In this case (the activity base is the number of transactions for a specific branch), is the teller cost a fixed or a variable cost? c. Determine the amount of teller cost in total and the average teller cost per branch for Vernon Bank, assuming that the start-up division operates 25, 30, 35 or 40 branches. In this case (the activity base is the number of branches), is the teller cost a fixed or a variable cost? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the relevant range of activity for new branch banks? (Enter the lower end of the relevant range first.) The relevant range is 85,000 to 55,000 transactions. Required A Required B >
Problem 2-19A (Algo) Context-sensitive nature of cost behavior classifications LO 2-1 Vernon Bank's start-up division establishes new branch banks. Each branch opens with three tellers. Total teller cost per branch is $96,000 per year. The three tellers combined can process up to 85,000 customer transactions per year. If a branch does not attain a volume of at least 55,000 transactions during its first year of operations, it is closed. If the demand for services exceeds 85,000 transactions, an additional teller is hired and the branch is transferred from the start-up division to regular operations. Required a. What is the relevant range of activity for new branch banks? b. Determine the amount of teller cost in total and the average teller cost per transaction for a branch that processes 55,000, 65,000, 75,000, or 85,000 transactions. In this case (the activity base is the number of transactions for a specific branch), is the teller cost a fixed or a variable cost? c. Determine the amount of teller cost in total and the average teller cost per branch for Vernon Bank, assuming that the start-up division operates 25, 30, 35 or 40 branches. In this case (the activity base is the number of branches), is the teller cost a fixed or a variable cost? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the relevant range of activity for new branch banks? (Enter the lower end of the relevant range first.) The relevant range is 85,000 to 55,000 transactions. Required A Required B >
Chapter15: Managing Short-term Assets
Section: Chapter Questions
Problem 12PROB
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Transcribed Image Text:Problem 2-19A (Algo) Context-sensitive nature of cost behavior classifications LO 2-1
Vernon Bank's start-up division establishes new branch banks. Each branch opens with three tellers. Total teller cost per branch is
$96,000 per year. The three tellers combined can process up to 85,000 customer transactions per year. If a branch does not attain a
volume of at least 55,000 transactions during its first year of operations, it is closed. If the demand for services exceeds 85,00O
transactions, an additional teller is hired and the branch is transferred from the start-up division to regular operations.
Required
a. What is the relevant range of activity for new branch banks?
b. Determine the amount of teller cost in total and the average teller cost per transaction for a branch that processes 55,000, 65,000,
75,000, or 85,000 transactions. In this case (the activity base is the number of transactions for a specific branch), is the teller cost a
fixed or a variable cost?
c. Determine the amount of teller cost in total and the average teller cost per branch for Vernon Bank, assuming that the start-up
division operates 25, 30, 35 or 40 branches. In this case (the activity base is the number of branches), is the teller cost a fixed or a
variable cost?
Complete this question by entering your answers in the tabs below.
Required A
Required B
Required C
What is the relevant range of activity for new branch banks? (Enter the lower end of the relevant range first.)
The relevant range is
85,000 to
55,000 transactions.
< Required A
Required B >
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