Simplifying the ABC System: TDABC

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

Resources ActivitiesTime per UnitActivity DriverTraditional AccountInterest-Bearing AccountSupervision$66,000Processing accounts0.20 hr.No. of accounts2,0001,000Phone and supplies94,000Issuing statements0.10 hr.No. of statements60,00010,000Salaries270,000Processing transactions0.05 hr.No. of transactions160,000120,000Computer18,000Answering customer inquiries0.15 hr.No. of inquiries1,5001,500Total448,000

At practical capacity, Golding uses 28,000 check processing hours.

Required:

1. Calculate the capacity cost rate for the checking account process. Round your answer to the nearest cent. $__________per hour

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

Processing accounts$_______ per accountIssuing statements$_______ per statementProcessing transactions$_______ per transactionAnswering inquiries$_______ per inquiry

2. Assuming there are 2,000 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 $__________

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)

Again, assuming that there are 2,000 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. Unit Cost = ($fill in the blank 8) x (fill in the blank 9) / fill in the blank 10 = fill in the blank 11

4. What if process improvements decreased the number of customer inquiries, leading to a 10 percent reduction in check processing hours and a $4,480 reduction in total resource costs? Calculate the capacity cost rate for the checking account process. Round your answers to the nearest cent.

$___________ per hour

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

Processing accounts$_______ per accountIssuing statements$_______ per statementProcessing transactions$_______ per transactionAnswering inquiries$_______ per inquiry