Roseville Community Bank uses activity-based costing to assign overhead costs to two different loan products—student loans and auto loans. The bank identified the following activities, estimated costs for each activity, and identified cost drivers for each activity for this coming year.

Required

a. Using the estimates for the year, compute the predetermined overhead rate for each activity (step 4 of the activity-based costing process).

b. Using the activity rates calculated in requirement a and the actual cost driver activity levels shown for July, allocate overhead to the three products for the month of July.

c. For each loan product, calculate the overhead cost per loan approved for the month of July. Round to the nearest cent.

d. For each loan product, calculate the total cost per loan approved for the month of July. Round to the nearest cent.

e. Assume you are the manager of the auto loans product line and would like to reduce the amount of overhead costs being applied to your products, which activity would you focus on first? Why?

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Estimated Annual Estimated Annual Overhead Cost Driver Activity Cost Driver Costs Activity Meeting with customers Reviewing applications Hours of meeting time $400,000 20,000 hours Number of applications reviewed 120,000 8,000 applications Running credit reports Total Number of credit reports run 420,000 6,000 credit reports $940,000 The following information for the two loan products offered by Roseville Commu- nity Bank is for the month of July. (LO3, LO5) Student Loans Auto Loans Direct labor cost per loan $250 $150 Overhead cost per loan ? ? Total cost per loan ? Loans approved 100 loans 300 loans Actual cost driver activity levels for the month of July are as follows: Student Auto Loans Loans Hours of meeting time 400 350 Number of applications reviewed 175 700 Number of credit reports run 150 550