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EasyCredit Financial is a banking services company that offers many different types of chequing accounts. It has recently adopted an activity-based costing (ABC) system to assign costs to various types of chequing accounts. The following data relate to one type of chequing account, the money market chequing account, and the ABC cost pools:

Total number of chequing accounts: 221,750

Number of money market chequing accounts: 70,000

1. Calculate the cost rate per cost driver activity for each of the five cost pools. Round to the nearest dollar.

2. Calculate the total cost assigned to the Money Market chequing account. Round to the nearest dollar.

3. Suppose that EasyCredit Financial allocates overhead using the number of chequing accounts as the allocation base and one cost pool. Determine the cost rate per chequing account and the per account cost assigned to the Money Market chequing account. Explain in detail the difference in cost allocations between this method and the ABC approach.

Chequeing Account Cost Pools Cost Pool Returned cheque costs Chequing account reconciliation costs New account setup Photocopies of cancelled cheques Cost Cost Driver $3,000,000 Number of returned cheques 60,000 Number of account reconciliation requests 780,000 Number of new accounts 300,000 Number of cancelled cheque copy requests 225,000 Per product group (type of chequing account) $4,365,000 Web site maintenance (online banking) Total Chequing account costs Annual activity information related to cost drivers Cost Pool All Products Returned cheque costs Cheque reconciliation costs New accounts Cancelled cheque photocopies requests Web site costs 200,000 returned cheques 3,000 chequing account reconciliations 60,000 new accounts 80,000 cancelled cheque photocopy requests 10 types of chequing accounts Money Market Chequing 18,000 420 20,0000 50,000 1