2 The ABC and The ABC Bank began operations in the mid-1980s. The bank quickly grow by providing checking accountries to many small buices Although ABC initially offered checking account services for individual cu retail customers, the bank primarily focused on its business customers During the comotie slowdown of the early 1990s that weakened the local coonmyd in business customer accounts to decline In response, ADC management adopted a new focusin an increasing the number of retail customer accounts By essively marketing individual retail accounts, Buckeye CEO, Rob Garrison, believes that this stating arrangement allows the bank to provide speedy customer service while operating at practical capacity (That is, the bank'stal is fully utilized inefficient operations, after allowing for bank holidays and other scheduled staff activities such us training To counter falling profits ABCS directors took two actions last year, both aimed at increasing the bank's retail customst base Fisse ABC established a service call center to respond to customer inquiries about account balances, checks cleared, fees charged and other banking condemns Second ABC directors authorized year-end bonuses to branch managers who met their busineras in the number of customers. However even though 80 percent of the branch managers met the targeted increase in customer acco the Bank's profils continued to decline CEO Rob Garrison does not understand why profits are declining given that the Bank is serving more customers ABC's southeast regional manager, Erik Larsen has also noticed that while small retail customers flock to the bank the number of business.com s barely stable Erik Larsen suspects that ABC's costingwystem may be part of the problem, ABC developed its simple costing system when the bank began operations in 1985 The bank does not trace any costs directly to individual customers. It simply treats all (noninterest continued to grow Today, the ARC Hank strives to maintains stacatusmessutomers, while actively competing for an increase market share or retail customers Recent une cartements (Exhibit Al reveal a decline the unes profits The bank's primary (nonatret) expense consistor salaries and employee benefits Most full-time employees first priority providing services to customers these employees conduct them administrative responsibilities during slack times the Bank schedules additional part-time employees to work during peak demand times, from HRAM-2PM and Friday aftemoons. Flexibility on scheduling pan-time employees means that the bank's sales lean and fully utilized ABC's exponi per confidentific Exhibh The bank er hun hesabatles and report from the de service wil.com The weat Heat the activities AIC Bank pored Te samolept way, we dentified the three most importante the color the bloches where he bech mu pred of day of For et poid. A pressed Ping charts 2 Podig weer 5. Responding commerciales de casal 38...The appach wypowis theme A developed in collaboration called based couting(AIC) He thene med venturing mode whether ABC could develop ARC Nemathew d her come as the may cont object E approached Rob Gare with this applicat endi poter down the bed you s polo by wwed out we atuh, menewa planned refine the outem by closing ..mudated activity was the one The ADC Megabytes that we with each of the cities. The team quickly discovered that, inspical Rain.laci.com de The Asachemployee to fill out a ston question to Bedst the only one that The can then owed up with an in-depth cow with cach employee The ABC com es combined information to estimate the percent of time each employee spent on each of the three activities chinand res. The am then estimated the other non labor resources that pend moderne However, persisted and Roberely the pilot All three local banches of the bank The Alplementation team included in the feach Colt poolt thereafter all we in thewands) as shown Exhibit The team identified the following cost drivers for each vity corpool each of the three activities consumed. For example, they traced to the responding to customer account inquiry stivity (1) the cost of toll-free telephone lines at the time we call center and (2) depreciation on other equipment and facilities the call emler per use Smilarly, the ABCm estimated the percentage or time the bank's formats..checked and intellexother such compong piedie financial statement to determine how much of the en depreciation was the time paying checks and providing teleservice To complete the newudy timely fashion, the ABC Actic wat Bayanchols Posting eller service Responding to quities Activity Centre Numer of checks Number offer transaction Number of continua which were already water the poorweeded the the ABC em Hanned develop ...fo.cc the mow The advantage of hudgeted rates veral rote rased on the prior years the budgette budete Lowasiociated with the vided by the budete pustity of The ABC se estimated that for the latest hank branches there and wine customer finnes perienced the anal activity levels in the show in C For example, thout reveals Outro custo 160.000 eller and .000 Bundy als in the customer service call center ABC Bank currently see 110.000 customer account and 50.000 business customer checking account. The trunk wars to one anges that customers keep in their and operations Aller examining the three inch bank indirect costs that is the cost om making up the branch has notere operating expel the Alice clawed the activaci a polithe red The ABC creativity the cold weather power dodge ..... did Nepid: checking out on the same del rese om hoc Avem neve Al ver businesses si SO 1 Complete profiterer for the retail store and customer forintot system thanh ABC System Based on the case do you think the original est systems Why And if yes, w can be improved 3 How can Acevedovelop marketing strategies that increase pedit Hawon the branch manager ABC data to dentity opportunities to Ironchetting or cracing con + Do you think tank'centives plan to increase the number i we Whale i my, wuld you can URITA Diwali The ore penger EXHENI Algement of direct interpretato Athly Cost Posle End Alvy Control to which Total Cost edire est Indirect continued in 3.0 Salaries T 440 Paying the Pranding 1 Det e and fact the wind Tollers Degree www witter Series 10 Provider 30 Hesponding to Turpheli ter wall Hepending ques The A The www Aww why am w EXHIBITC Activity Cost Drivers by Customer Line Annual Number of Units Annual Number of Units of Activity-Cost Driver of Activity.Cost Driver Used by Retail Customers Used by Business Customers (in 1,000s) (in 1,000s) 570 2,280 Total 2,850 Activity Cost Driver Checks processed Teller transactions Account inquiry calls to customer service call center 160 40 200 95 100