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Exercise 7-8 (Algo) Computing and Interpreting Activity Rates [LO7-3] The operations vice president of Security Home Bank has been interested in investigating the efficiency
Exercise 7-8 (Algo) Computing and Interpreting Activity Rates [LO7-3] The operations vice president of Security Home Bank has been interested in investigating the efficiency of the bank's operations. She has been particularly concerned about the costs of handling routine transactions at the bank and would like to compare these costs at the bank's various branches. If the branches with the most efficient operations can be identified, their methods can be studied and then replicated elsewhere. While the bank maintains meticulous records of wages and other costs, there has been no attempt thus far to show how those costs are related to the various services provided by the bank. The operations vice president has asked your help in conducting an activity-based costing study of bank operations. In particular, she would like to know the cost of opening an account, the cost of processing deposits and withdrawals, and the cost of processing other customer transactions. The Westfield branch of Security Home Bank has submitted the following cost data for last year: Teller wages Assistant branch manager salary Branch manager salary Total $ 158,000 72,000 90,000 $ 320,000 Virtually all other costs of the branch-rent, depreciation, utilities, and so on-are organization-sustaining costs that cannot be meaningfully assigned to individual customer transactions such as depositing checks. In addition to the cost data above, the employees of the Westfield branch have been interviewed concerning how their time was distributed last year across the activities included in the activity-based costing study. The results of those interviews appear below: Opening Accounts Teller vages 4 Assistant branch manager salary 14 Branch manager salary 41 Distribution of Resource Consumption Across Activities Processing Processing Other Deposits and 75% Withdrawals Customer Transactions 17 211 16 Other Activities Totals 4 100% 50% 80% 100% 100% 156 0% The manager of the Westfield branch of Security Home Bank has provided the following data concerning the transactions of the branch during the past year.
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