The operations vice president of Security Home Bank has been intelested IN has been particularly concerned about the costs of handling routine transactions at the bank and would like to compare these costs at the bank's various branches. If the branches with the most efficient operations can be identified, their methods can be studied and then replicated elsewhere. While the bank maintains meticulous records of wages and other costs, there has been no attempt thus far to show how those costs are related to the various services provided by the bank. The operations vice president has asked your help in conducting an activity-based costing study of bank operations. In particular, she would like to know the cost of opening an account, the cost of processing deposits and withdrawals, and the cost of processing other customer transactions. The Westfield branch of Security Home Bank has submitted the following cost data for last year: Teller wages Assistant branch manager salary Branch manager salary $ 160,e00 75,e0e 80, e00 $ 315,000 Total Virtually all other costs of the branch-rent, depreciation, utilities, and so on-are organization-sustaining costs that cannot be meaningfully assigned to individual customer transactions such as depositing checks.
The operations vice president of Security Home Bank has been intelested IN has been particularly concerned about the costs of handling routine transactions at the bank and would like to compare these costs at the bank's various branches. If the branches with the most efficient operations can be identified, their methods can be studied and then replicated elsewhere. While the bank maintains meticulous records of wages and other costs, there has been no attempt thus far to show how those costs are related to the various services provided by the bank. The operations vice president has asked your help in conducting an activity-based costing study of bank operations. In particular, she would like to know the cost of opening an account, the cost of processing deposits and withdrawals, and the cost of processing other customer transactions. The Westfield branch of Security Home Bank has submitted the following cost data for last year: Teller wages Assistant branch manager salary Branch manager salary $ 160,e00 75,e0e 80, e00 $ 315,000 Total Virtually all other costs of the branch-rent, depreciation, utilities, and so on-are organization-sustaining costs that cannot be meaningfully assigned to individual customer transactions such as depositing checks.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Exercise 7-7 (Static) First-Stage Allocations [LO7-2]
The operations vice president of Security Home Bank has been interested in investigating the efficiency of the bank's operations. She
has been particularly concerned about the costs of handling routine transactions at the bank and would like to compare these costs at
the bank's various branches. If the branches with the most efficient operations can be identified, their methods can be studied and
then replicated elsewhere. While the bank maintains meticulous records of wages and other costs, there has been no attempt thus far
to show how those costs are related to the various services provided by the bank. The operations vice president has asked your help
in conducting an activity-based costing study of bank operations. In particular, she would like to know the cost of opening an account,
the cost of processing deposits and withdrawals, and the cost of processing other customer transactions.
The Westfield branch of Security Home Bank has submitted the following cost data for last year:
ces
Teller wages
Assistant branch manager salary
Branch manager salary
$ 160,000
75,000
80,000
Total
$ 315,000
Virtually all other costs of the branch-rent, depreciation, utilities, and so on-are organization-sustaining costs that cannot be
meaningfully assigned to individual customer transactions such as depositing checks.
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DELL
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insert
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F6
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F8
F9
F10
F11
F12
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Transcribed Image Text:Exercise 7-7 (Static) First-Stage Allocations [LO7-2]
The operations vice president of Security Home Bank has been interested in investigating the efficiency of the bank's operations. She
has been particularly concerned about the costs of handling routine transactions at the bank and would like to compare these costs at
the bank's various branches. If the branches with the most efficient operations can be identified, their methods can be studied and
then replicated elsewhere. While the bank maintains meticulous records of wages and other costs, there has been no attempt thus far
to show how those costs are related to the various services provided by the bank. The operations vice president has asked your help
in conducting an activity-based costing study of bank operations. In particular, she would like to know the cost of opening an account,
the cost of processing deposits and withdrawals, and the cost of processing other customer transactions.
The Westfield branch of Security Home Bank has submitted the following cost data for last year:
ces
Teller wages
Assistant branch manager salary
Branch manager salary
$ 160,000
75,000
80,000
Total
$ 315,000
Virtually all other costs of the branch-rent, depreciation, utilities, and so on-are organization-sustaining costs that cannot be
meaningfully assigned to individual customer transactions such as depositing checks.
< Prev
17 of 19
Next >
DELL
DII
prt sc
home
end
insert
dele
F3
F4
F5
F6
F7
F8
F9
F10
F11
F12
&
3
5
6
7
8
9
Transcribed Image Text:in aadition to tne cost aata apove, the empioyees of tne westrieia pranch nave peen interviewea concerning now tneir time was
distributed last year across the activities included in the activity-based costing study. The results of those interviews appear below:
Distribution of Resource Consumption Across Activities
Processing Other
Processing
Deposits and
Withdrawals
Opening
Customer
Other
Accounts
Transactions
Activities
Totals
20%
10%
100%
Teller wages
Assistant branch manager salary
Branch manager salary
5%
65%
15%
5%
30%
50%
100%
5%
0%
10%
85%
100%
Required:
Prepare the first-stage allocation for the activity-based costing study.
Distribution of Resource Consumption Across Activities
Processing
Other
Opening
Accounts
Processing
Deposits and
Withdrawals
Other
Totals
Customer
Transactions
Activities
Teller wages
Assistant branch manager salary
Branch manager salary
Total cost
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Expert Solution
Step 1
Solution:
First stage allocation under activity based costing is distribution of cost to different activities based on usage.
Thereafter activity rate is computed based on cost accumulated in different activity with their allocation base.
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