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Simplifying the ABC System: TDABC

Golding Bank provided the following data about its two checking account products and their associated resources and activities:

Resources		Activities	Time per Unit	Activity Driver	Traditional Account	Interest-Bearing Account
Supervision	$60,000	Processing accounts	0.20 hr.	No. of accounts	2,500	1,700
Phone and supplies	86,000	Issuing statements	0.10 hr.	No. of statements	60,000	10,000
Salaries	152,000	Processing transactions	0.05 hr.	No. of transactions	160,000	120,000
Computer	22,000	Answering customer inquiries	0.15 hr.	No. of inquiries	1,500	1,500
Total	320,000

At practical capacity, Golding uses 20,000 check processing hours.

Required:

1. Calculate the capacity cost rate for the checking account process. Round your answer to the nearest cent. $fill in the blank 1 per hour

Calculate the activity rates for the four activities. Round your answers to the nearest cent.

Processing accounts	$fill in the blank 2 per account
Issuing statements	$fill in the blank 3 per statement
Processing transactions	$fill in the blank 4 per transaction
Answering inquiries	$fill in the blank 5 per inquiry

If the total number of statements issued was 28,000, calculate the cost of the issuing statements activity. $fill in the blank 6

2. Assuming there are 2,500 interest-bearing checking accounts, calculate the cost per account using the activity rates from Requirement 1. Round your answers to the nearest cent. Unit cost $fill in the blank 7

3. A time equation is used to assign resource costs to checking accounts. Select a time equation for the interest-bearing checking account product.

0.20(number of accounts) x 0.10(number of statements) - 0.05(number of transactions) / 0.15(number of inquiries)0.20(number of accounts) - 0.10(number of statements) / 0.05(number of transactions) x 0.15(number of inquiries)0.20(number of accounts) + 0.10(number of statements) + 0.05(number of transactions) + 0.15(number of inquiries)0.20(number of accounts) / 0.10(number of statements) x 0.05(number of transactions) - 0.15(number of inquiries)0.20(number of accounts) + 0.10(number of statements) + 0.05(number of transactions) + 0.15(number of inquiries)

Again, assuming that there are 2,500 interest bearing accounts, show that the resource cost per account is the same as calculated in Requirement 2. Round your answers to the nearest cent. $fill in the blank 9

4. What if process improvements decreased the number of customer inquiries, leading to a 10 percent reduction in check processing hours and a $3,200 reduction in total resource costs? Calculate the capacity cost rate for the checking account process. Round your answers to the nearest cent.

$fill in the blank 10 per hour

Update all the activity rates for these changes in operating conditions.

Processing accounts	$fill in the blank 11 per account
Issuing statements	$fill in the blank 12 per statement
Processing transactions	$fill in the blank 13 per transaction
Answering inquiries	$fill in the blank 14 per inquiry