Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Textbook Question
Chapter 4, Problem 7CE
Golding Bank provided the following data about its resources and activities for its checking account process:
Required:
- 1. Calculate the capacity cost rate for the checking account process.
- 2. Calculate the activity rates for the four activities. If the total number of statements issued was 20,000, calculate the cost of the issuing statements activity.
- 3. What if process improvements decreased the number of customer inquiries, leading to a 10 percent reduction in check processing hours and a $10,000 reduction in total resource costs? Update all the activity rates for these changes in operating conditions.
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Simplifying the ABC System: TDABC
Golding Bank provided the following data about its two checking account products and their associated resources and activities:
Resources
Supervision
Phone and supplies
Salaries
Computer
Total
Activities
$62,000 Processing accounts
76,000 Issuing statements
304,000 Processing transactions
26,000 Answering customer inquiries
468,000
At practical capacity, Golding uses 26,000 check processing hours.
Required:
$
$
$
Processing accounts
Issuing statements
Processing transactions
Answering inquiries
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
Issuing statements
Processing transactions
Answering inquiries
per account
per statement
per transaction
per inquiry
Time per Unit Activity Driver
No. of accounts
No. of statements
No. of transactions
No. of inquiries
$
0.20 hr.
0.10…
Northwestern Bank (NB) offers only checking accounts. Customers can write checks and use a network of automated teller machines.
NB earns revenue by investing the money deposited; currently, it averages 4.1 percent annually on its investments of those deposits.
To compete with larger banks, NB pays depositors 0.3 percent on all deposits. A recent study classified the bank's annual operating
costs into four activities.
Activity
Using ATM
Visiting branch
Processing transactions
Managing functions
Total overhead
ATM uses
Branch visits
Number of transactions
Average deposit
Cost Driver
Data on two representative customers follow:
Required:
Number of uses
Number of visits
Number of transactions
Total deposits
Emily
40
5
200
$ 10,000
Jacob
130
45
520
$ 10,000
Cost
$ 1,843, 200
1,339, 200
8,110,080
7,238,400
$ 18,530,880
Driver Volume
3,072,000 uses
279,000 visits
122,880,000 transactions
$ 579,090,000 in deposits
a. Compute the operating profit for Northwestern Bank.
b. Compute the profit…
Simplifying the ABC System: TDABC
Golding Bank provided the following data about its resources and activities for its checking account process:
Time per Unit
Resources
Activities
Activity Driver
Supervision
$68,000
Processing accounts
0.20 hr.
No. of accounts
Phone and supplies
84,000
Issuing statements
0.10 hr.
No. of statements
Salaries
188,000
Processing transactions
0.05 hr.
No. of transactions
Computer
20,000
Answering customer inquiries
0.15 hr.
No. of inquiries
Total
360,000
Total check processing
20,000
hours
(practical capacity)
Required:
1. Calculate the capacity cost rate for the checking account process. Round your answer to the nearest cent.
per hour
2. Calculate the activity rates for the four activities. Round your answers to the nearest cent.
Processing accounts
per account
Issuing statements
$4
per statement
Processing transactions
per transaction
Answering inquiries
per inquiry
If the total number of statements issued was 26,000, calculate the cost of the issuing…
Chapter 4 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 4 - What is a predetermined overhead rate? Explain why...Ch. 4 - Describe what is meant by under- and overapplied...Ch. 4 - Explain how a plantwide overhead rate, using a...Ch. 4 - What are non-unit-related overhead activities?...Ch. 4 - What is an overhead consumption ratio?Ch. 4 - Overhead costs are the source of product cost...Ch. 4 - What is activity-based product costing?Ch. 4 - What are the six steps that define the design of...Ch. 4 - Explain how the cost of resources is assigned to...Ch. 4 - Prob. 10DQ
Ch. 4 - Identify and define two types of activity drivers.Ch. 4 - What are unit-level activities? Batch-level...Ch. 4 - Prob. 13DQCh. 4 - Prob. 14DQCh. 4 - Prob. 15DQCh. 4 - Prob. 1CECh. 4 - Warner Company has the following data for the past...Ch. 4 - Lansing. Inc., provided the following data for its...Ch. 4 - Larsen, Inc., produces two types of electronic...Ch. 4 - Roberts Company produces two weed eaters: basic...Ch. 4 - Golding Bank provided the following data about its...Ch. 4 - Golding Bank provided the following data about its...Ch. 4 - Electan Company produces two types of printers....Ch. 4 - Patterson Company produces wafers for integrated...Ch. 4 - Selected activities and other information are...Ch. 4 - Ripley, Inc., costs products using a normal...Ch. 4 - Predetermined Overhead Rate, Application of...Ch. 4 - Craig Company uses a predetermined overhead rate...Ch. 4 - Departmental Overhead Rates Mariposa, Inc.,...Ch. 4 - McCourt Company produces two types of leather...Ch. 4 - Deoro Company has identified the following...Ch. 4 - Prob. 17ECh. 4 - Secondary Activities Refer to the interview in...Ch. 4 - Bob Randall, cost accounting manager for Hemple...Ch. 4 - Prob. 20ECh. 4 - Bob Randall, cost accounting manager for Hemple...Ch. 4 - Silven Company has identified the following...Ch. 4 - Silven Company has identified the following...Ch. 4 - Gee Manufacturing produces two models of camshafts...Ch. 4 - Cushing, Inc., costs products using a normal...Ch. 4 - Nonunit-level drivers are prominent in...Ch. 4 - Plata Company has identified the following...Ch. 4 - Assume that the inspection activity has an...Ch. 4 - Consider the information given on two products and...Ch. 4 - Primera Company produces two products and uses a...Ch. 4 - Fisico Company produces exercise bikes. One of its...Ch. 4 - Prob. 32PCh. 4 - Glencoe First National Bank operated for years...Ch. 4 - Autotech Manufacturing is engaged in the...Ch. 4 - The Bienestar Cardiology Clinic has two major...Ch. 4 - Reducir, Inc., produces two different types of...Ch. 4 - Refer to the data given in Problem 4.36 and...Ch. 4 - Escuha Company produces two type of calculators:...
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