PROBLEM 6-13. Activity-Based Costing at a Service Company [LO 5] Tannhauser Financial is a banking services company that offers many different types of checking accounts.It has recently adopted an activity-based costing system to assign costs to various types of checking accounts. The following data relate to one type of checking account,the money market checking account, and the ABC cost pools:

Total Number of Checking Accounts 221,750 Number of Money Market Accounts 60,000 Checking account cost pools: Cost Pool Cost Cost Driver

Returned check costs $3,000,000 Number of returned checks

Checking account Number of account

reconciliation costs 60,000 reconciliation requests

New account setup 780,000 Number of new accounts

Copies of cancelled checks 300,000 Number of cancelled check copy requests

Web site maintenance Per product group

(for online banking) 225,000 (type of checking account)

Total checking account costs $4,365,000 Annual activity information related to cost drivers: Cost Pool All Products Money Market Checking

Returned checks 200,000 returned checks 18,000

Check reconciliation costs 3,000 checking account reconciliations 420

New accounts 60,000 new accounts 20,000

Cancelled check copy requests 80,000 cancelled check copy requests 50,000

Web site costs 10 types of checking accounts 1 Required a. Calculate the cost rate per cost driver activity for each of the ve cost pools.Round to two decimal places.

b. Calculate the total cost assigned to the money market checking account.Round to two decimal places.

c. Suppose that Tannhauser Financial allocates overhead using the number of checking accounts as the allocation base and one cost pool.Determine the cost rate per checking account and the per account cost assigned to the money market checking account.Discuss the difference in cost allocations between this method and the activity-based costing approach.