Problem 2 Listed below are several costs incurred in the loan department of Suwanee Bank and Trust Company.

For each cost, indicate which of the following classifications best describe the cost. More than one classification may apply to the same cost item.

Cost Classifications

a. Controllable by the loan department manager

b. Uncontrollable by the loan department manager

c. Direct cost of the loan department

d. Indirect cost of the loan department

e. Differential cost

f. Marginal cost g. Opportunity cost h. Sunk cost i. Out-of-pocket cost Cost Items 1. Salary of the loan department manager.

2. Cost of office supplies used in the loan department.

3. Cost of the department’s desktop computers purchased by the loan department manager last year.

4. The portion of general advertising cost of the bank that has been allocated to the loan department.

5. Revenue that the loan department would have generated for the bank if a branch loan office had been located downtown instead of in the next county.

6. Difference in the cost incurred by the bank when one additional loan application is processed.