Internal activity analysis

The Marietta branch of Atlanta State Savings Bank (ASSB) is a retail branch in a rapidly growing residential area. It services individuals and local businesses. To support its services, the branch employs 14 tellers, 3 retail sales managers (RSM), and the branch managing officer. The branch services about 2,900 customers. Each of the 70 branches of ASSB is implementing ABC in order to improve profitability. ASSB's branch managing officers have been given the responsibility to implement activity-based costing. The managing officer at the Marietta branch decided to implement a two-stage ABC system. The following process map depicts its two-stage ABC system. (Click the icon to view the process map.) Two-Stage ABC TELLERS RETAIL SALES MANAGERS $220,000 MANAGING OFFICER $120,000 OTHER RESOURCES (UNALLOCATED) $400,000 $370,000 R M 0 T R T R M T R 20% 15% OPEN NEW ACCOUNTS 55% 15% 10% 15% 30% 35% PROCESS PROCESS DEPOSITS AND OTHER WITHDRAWALS TRANSACTIONS No. of No. of PDW Deposits and POT Transactions Withdrawals No. of ONA) New Accounts The results of the ABC study are summarized in the "Internal Activity Analysis": 6 Click the icon to view the internal activity analysis.) (Click the icon to view the cost data for the last year.) All employees have been interviewed as part of the ABC study. For example, tellers were asked how they spent their time. Three major activities were identified. They said that they spent most of their time (50%) processing deposits and withdrawals. They also estimated that they spent about 15% of their time processing new accounts and about 25% of their time processing other transactions. The remaining 10% of their time was spent on all other banking activities. The results of the interviews are presented in the following table: Internal Activity Analysis Process All Other Open New Deposits and Process Other Banking Accounts Withdrawals Transactions Activities Total Teller wages 15% 50% 25% 10% 100% Retail sales 15% 10% 20% 55% 100% manager salary Managing officer 0% 15% 30% 55% 100% salary The Marietta branch has the following cost data for the last year. Teller wages 390,000 RSM salaries and benefits 300,000 Managing officer salary and benefits 160,000 Other bank costs 400,000 $ Total 1,250,000 The "other bank costs" include depreciation on the facility including furniture, building, equipment, insurance, rentals of computers, contracted computer services, telecommunications, and utilities. These costs cannot be directly or indirectly related to routine bank activities, such as processing new accounts or processing deposits or withdrawals, and, thus, are unallocated. There are no costs that can be traced directly to customers so the Marietta branch has just two types of costs-indirect and unallocated. A part of the activity analysis conducted at the Marietta branch of Atlanta State Savings Bank (ASSB) was identifying potential cost drivers for each major activity. The following cost drivers were chosen because they were both plausible and reliable and data were available: (Click the icon to view the cost driver data.) (Click the icon to view the calculation of traceable costs.) (Click the icon to view the benchmarking data.) Read the requirements. Activity Cost Driver Process new accounts Number of new accounts Process deposits and withdrawals Number of deposits and withdrawals Process other transactions Number of other transactions Annual Flow of Cost Driver 580 158,000 45,000 Allocated cost Activity Open new accounts Resource Tellers $ 58,500 45,000 Retail sales managers $ 103,500 Total traceable cost Activity Process deposits and withdrawals $ Resource Tellers Retail sales managers Managing officers Allocated cost 195,000 30,000 24,000 $ 249,000 Total traceable cost Activity Process other transactions $ Resource Tellers Retail sales managers Managing officers Allocated cost 97,500 60,000 48,000 GA 205,500 Total traceable cost Of the 2,900 customers of the branch, only 200 are local businesses. The business-customer class generated 10 new accounts, 86,000 deposits and withdrawals, and 20,000 other transactions. The implementation of ABC at all branches of ASSB provided sufficient data for internal benchmarking. The following are the lowest activity costs among all branches implementing two-stage ABC systems: Activity Lowest Activity Cost per Driver Unit Open new account $199.95 per new account Process deposits and withdrawals $2.38 per deposit or withdrawal Process other transactions $4.82 per transaction Customer Class Lowest Customer Cost per Account Retail $136.21 Commercial $1198.92 1. Determine the allocated (indirect) cost per account for retail and commercial accounts. Use the process map as a guide. 2. Under what conditions would benchmarking between the Marietta branch of ASSB and the other branches be inappropriate? 3. What do the results of the ABC study suggest? Requirement 1. Determine the allocated indirect) cost per account for retail and commercial accounts. Use the process map as a guide. Begin by calculating the cost per unit for each of the three main activities. First enter the formula, then calculate the cost per unit. (Round your answers to four decimal places.) Cost per Driver Unit Requirement 1. Determine the allocated indirect) cost per account for retail and commercial accounts. Use the process map as a guide. Begin by calculating the cost per unit for each of the three main activities. First enter the formula, then calculate the cost per unit. (Round your answers to four decimal places.) Cost per Driver Unit Retail managers salaries Total managers salaries Total tellers wages Traceable costs Requirement 1. Determine the allocated (indirect) cost per account for retail and commercial accounts. Use the process map as a guide. Begin by calculating the cost per unit for each of the three main activities. First enter the formula, then calculate the cost per unit. (Round your answers to four decimal places.) Cost per Driver Unit Annual flow of driver units Percent of direct labor hours Percent of resource used Percent of space used Space used by the activity Time consumed by the activity Choose from any drop-down list and then click Check Answer. The Marietta branch of Atlanta State Savings Bank (ASSB) is a retail branch in a rapidly growing residential area. It services individuals and local businesses. To support its services, the branch employs 14 tellers, 3 retail sales managers (RSM), and the branch managing officer. The branch services about 2,900 customers. Each of the 70 branches of ASSB is implementing ABC in order to improve profitability. ASSB's branch managing officers have been given the responsibility to implement activity-based costing. The managing officer at the Marietta branch decided to implement a two-stage ABC system. The following process map depicts its two-stage ABC system. (Click the icon to view the process map.) Two-Stage ABC TELLERS RETAIL SALES MANAGERS $220,000 MANAGING OFFICER $120,000 OTHER RESOURCES (UNALLOCATED) $400,000 $370,000 R M 0 T R T R M T R 20% 15% OPEN NEW ACCOUNTS 55% 15% 10% 15% 30% 35% PROCESS PROCESS DEPOSITS AND OTHER WITHDRAWALS TRANSACTIONS No. of No. of PDW Deposits and POT Transactions Withdrawals No. of ONA) New Accounts The results of the ABC study are summarized in the "Internal Activity Analysis": 6 Click the icon to view the internal activity analysis.) (Click the icon to view the cost data for the last year.) All employees have been interviewed as part of the ABC study. For example, tellers were asked how they spent their time. Three major activities were identified. They said that they spent most of their time (50%) processing deposits and withdrawals. They also estimated that they spent about 15% of their time processing new accounts and about 25% of their time processing other transactions. The remaining 10% of their time was spent on all other banking activities. The results of the interviews are presented in the following table: Internal Activity Analysis Process All Other Open New Deposits and Process Other Banking Accounts Withdrawals Transactions Activities Total Teller wages 15% 50% 25% 10% 100% Retail sales 15% 10% 20% 55% 100% manager salary Managing officer 0% 15% 30% 55% 100% salary The Marietta branch has the following cost data for the last year. Teller wages 390,000 RSM salaries and benefits 300,000 Managing officer salary and benefits 160,000 Other bank costs 400,000 $ Total 1,250,000 The "other bank costs" include depreciation on the facility including furniture, building, equipment, insurance, rentals of computers, contracted computer services, telecommunications, and utilities. These costs cannot be directly or indirectly related to routine bank activities, such as processing new accounts or processing deposits or withdrawals, and, thus, are unallocated. There are no costs that can be traced directly to customers so the Marietta branch has just two types of costs-indirect and unallocated. A part of the activity analysis conducted at the Marietta branch of Atlanta State Savings Bank (ASSB) was identifying potential cost drivers for each major activity. The following cost drivers were chosen because they were both plausible and reliable and data were available: (Click the icon to view the cost driver data.) (Click the icon to view the calculation of traceable costs.) (Click the icon to view the benchmarking data.) Read the requirements. Activity Cost Driver Process new accounts Number of new accounts Process deposits and withdrawals Number of deposits and withdrawals Process other transactions Number of other transactions Annual Flow of Cost Driver 580 158,000 45,000 Allocated cost Activity Open new accounts Resource Tellers $ 58,500 45,000 Retail sales managers $ 103,500 Total traceable cost Activity Process deposits and withdrawals $ Resource Tellers Retail sales managers Managing officers Allocated cost 195,000 30,000 24,000 $ 249,000 Total traceable cost Activity Process other transactions $ Resource Tellers Retail sales managers Managing officers Allocated cost 97,500 60,000 48,000 GA 205,500 Total traceable cost Of the 2,900 customers of the branch, only 200 are local businesses. The business-customer class generated 10 new accounts, 86,000 deposits and withdrawals, and 20,000 other transactions. The implementation of ABC at all branches of ASSB provided sufficient data for internal benchmarking. The following are the lowest activity costs among all branches implementing two-stage ABC systems: Activity Lowest Activity Cost per Driver Unit Open new account $199.95 per new account Process deposits and withdrawals $2.38 per deposit or withdrawal Process other transactions $4.82 per transaction Customer Class Lowest Customer Cost per Account Retail $136.21 Commercial $1198.92 1. Determine the allocated (indirect) cost per account for retail and commercial accounts. Use the process map as a guide. 2. Under what conditions would benchmarking between the Marietta branch of ASSB and the other branches be inappropriate? 3. What do the results of the ABC study suggest? Requirement 1. Determine the allocated indirect) cost per account for retail and commercial accounts. Use the process map as a guide. Begin by calculating the cost per unit for each of the three main activities. First enter the formula, then calculate the cost per unit. (Round your answers to four decimal places.) Cost per Driver Unit Requirement 1. Determine the allocated indirect) cost per account for retail and commercial accounts. Use the process map as a guide. Begin by calculating the cost per unit for each of the three main activities. First enter the formula, then calculate the cost per unit. (Round your answers to four decimal places.) Cost per Driver Unit Retail managers salaries Total managers salaries Total tellers wages Traceable costs Requirement 1. Determine the allocated (indirect) cost per account for retail and commercial accounts. Use the process map as a guide. Begin by calculating the cost per unit for each of the three main activities. First enter the formula, then calculate the cost per unit. (Round your answers to four decimal places.) Cost per Driver Unit Annual flow of driver units Percent of direct labor hours Percent of resource used Percent of space used Space used by the activity Time consumed by the activity Choose from any drop-down list and then click Check