Marvel Bank & Trust operates in a very competitive marketplace, using a traditional labor-hour-based system to determine
Question:
Marvel Bank & Trust operates in a very competitive marketplace, using a traditional labor-hour-based system to determine the cost of processing its mortgage loans. Recently, the firm explored a switch to activity-based costing to determine the wisdom of its previous ways. The following information is available:
ActivityCostDriveDriver UnitsApplication processing765,600Applications3,300Loan underwriting838,500Underwriting hours19,500Loan closure835,200Legal hours8,700Total2,439,300
Two loan applications, among many others, were originated and closed during the year. No. 7439 consumed 7.0 hours in loan underwriting and 5.0 hours in loan closure, for a total of 12 hours. No. 7809 also required 12 hours of time, subdivided as follows: 5.5 hours in loan underwriting and 6.5 hours in loan closure.
Required:
A.Use an activity-based-costing system and determine the cost of processing, underwriting, and closing the two loan applications.(Round your intermediate calculations to the nearest whole dollar.)
B.Determine the cost of processing the two loans if Marvel uses the traditional labor-hour-based system. Conversations with management found that, on average, each application took sixteen labor hours of processing time, excluding underwriting and closure.(Round your intermediate calculationsto the nearest whole number.)