Teller wages $160,000 Assistant branch manager salary. Branch manager salary 75,000 80,000 Total $315,000 Virtually all other costs of the branch-rent, depreciation, utilities, and so on-are organization- sustaining costs that cannot be meaningfully assigned to individual customer transactions such as depositing checks. In addition to the cost data above, the employees of the Westfield branch have been inter- viewed concerning how their time was distributed last year across the activities included in the activity-based costing study. The results of those interviews appear below: Distribution of Resource Consumption Across Activities Processing Processing Other Opening Deposits and Customer Other Accounts Withdrawals Transactions Activities Total Teller wages 5% 65% 20% 10% 100% Assistant branch manager salary 15% 5% 30% 50% 100% .... Branch manager salary..... 5% 0% 10% 85% 100% EXHIBIT 7-6 First-Stage Allocations to Activity Cost Pools A F H 1 Activity Cost Pools Customer Product Customer Orders Design Order Size Relations Other Totals 3 4 Production Department Indirect factory wages 6. $ 125,000 S 200,000 S 100 000 S 50.000 $ 25,000 S 180.000 60,000 500,000 60.000 Factory equipment depreciation Factory utilities Factory building lease 60,000 48,000 300,000 12,000 120,000 80,000 80,000 10 General Administrative Department: Administrative wages and salaries Office equipment depreciation Administrative building lease 60,000 15.000 160,000 22,500 11 20.000 40,000 120,000 400.000 50.000 60.000 12 12,500 13 14 15 Marketing Department 16 60.000 65.000 5.000 20 000 Marketing wages and salaries 17 150.000 35 000 25,000 10.000 250,000 Selling expenses 18 50.000 $ 320 000 S 252.000 S 380.000 S367 500 S 490 500 S 1810 000 19 Total 20 4 Exhibit 7-5 Exhibit 7-6 Exhibit 7-7 Exhibit 7-9 Exhibit 7-10 Exhibit 7-11 Exhibit 7-11 (2) I Exhibit 7-5 shows that Customer Orders consume 25% of the resources represented by the $500,000 of indirected factory wages. 25% x $500,000 = $125,000 Other entries in the table are computed in a similar fashion.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The operations vice president of Security Home Bank has been interested in investigating the efficiency of the bank’s operations. She has been particularly concerned about the costs of handling routine transactions at the bank and would like to compare these costs at the bank’s various
branches. If the branches with the most efficient operations can be identified, their methods can be studied and then replicated elsewhere. While the bank maintains meticulous records of wages and other costs, there has been no attempt thus far to show how those costs are related to the various services provided by the bank. The operations vice president has asked your help in conducting an activity-based costing study of bank operations. In particular, she would like to know the cost of opening an account, the cost of processing deposits and withdrawals, and the cost of processing other customer transactions.
The Westfield branch of Security Home Bank has submitted the following cost data for last year:

 

Required:
Prepare the first-stage allocation for the activity-based costing study. (See Exhibit 7–6 for an example of a first-stage allocation.)

 

Teller wages
$160,000
Assistant branch manager salary.
Branch manager salary
75,000
80,000
Total
$315,000
Virtually all other costs of the branch-rent, depreciation, utilities, and so on-are organization-
sustaining costs that cannot be meaningfully assigned to individual customer transactions such as
depositing checks.
In addition to the cost data above, the employees of the Westfield branch have been inter-
viewed concerning how their time was distributed last year across the activities included in the
activity-based costing study. The results of those interviews appear below:
Distribution of Resource Consumption Across Activities
Processing
Processing
Other
Opening Deposits and Customer
Other
Accounts Withdrawals Transactions Activities Total
Teller wages
5%
65%
20%
10%
100%
Assistant branch manager salary
15%
5%
30%
50%
100%
....
Branch manager salary.....
5%
0%
10%
85%
100%
Transcribed Image Text:Teller wages $160,000 Assistant branch manager salary. Branch manager salary 75,000 80,000 Total $315,000 Virtually all other costs of the branch-rent, depreciation, utilities, and so on-are organization- sustaining costs that cannot be meaningfully assigned to individual customer transactions such as depositing checks. In addition to the cost data above, the employees of the Westfield branch have been inter- viewed concerning how their time was distributed last year across the activities included in the activity-based costing study. The results of those interviews appear below: Distribution of Resource Consumption Across Activities Processing Processing Other Opening Deposits and Customer Other Accounts Withdrawals Transactions Activities Total Teller wages 5% 65% 20% 10% 100% Assistant branch manager salary 15% 5% 30% 50% 100% .... Branch manager salary..... 5% 0% 10% 85% 100%
EXHIBIT 7-6
First-Stage Allocations to Activity
Cost Pools
A
F
H
1
Activity Cost Pools
Customer
Product
Customer
Orders
Design
Order Size Relations
Other
Totals
3
4 Production Department
Indirect factory wages
6.
$ 125,000 S 200,000 S 100 000 S 50.000 $ 25,000 S
180.000
60,000
500,000
60.000
Factory equipment depreciation
Factory utilities
Factory building lease
60,000
48,000
300,000
12,000
120,000
80,000
80,000
10 General Administrative Department:
Administrative wages and salaries
Office equipment depreciation
Administrative building lease
60,000
15.000
160,000
22,500
11
20.000
40,000
120,000
400.000
50.000
60.000
12
12,500
13
14
15 Marketing Department
16
60.000
65.000
5.000
20 000
Marketing wages and salaries
17
150.000
35 000
25,000
10.000
250,000
Selling expenses
18
50.000
$ 320 000 S 252.000 S 380.000 S367 500 S 490 500 S 1810 000
19 Total
20
4 Exhibit 7-5
Exhibit 7-6
Exhibit 7-7
Exhibit 7-9
Exhibit 7-10
Exhibit 7-11
Exhibit 7-11 (2) I
Exhibit 7-5 shows that Customer Orders consume 25% of the
resources represented by the $500,000 of indirected factory wages.
25% x $500,000 = $125,000
Other entries in the table are computed in a similar fashion.
Transcribed Image Text:EXHIBIT 7-6 First-Stage Allocations to Activity Cost Pools A F H 1 Activity Cost Pools Customer Product Customer Orders Design Order Size Relations Other Totals 3 4 Production Department Indirect factory wages 6. $ 125,000 S 200,000 S 100 000 S 50.000 $ 25,000 S 180.000 60,000 500,000 60.000 Factory equipment depreciation Factory utilities Factory building lease 60,000 48,000 300,000 12,000 120,000 80,000 80,000 10 General Administrative Department: Administrative wages and salaries Office equipment depreciation Administrative building lease 60,000 15.000 160,000 22,500 11 20.000 40,000 120,000 400.000 50.000 60.000 12 12,500 13 14 15 Marketing Department 16 60.000 65.000 5.000 20 000 Marketing wages and salaries 17 150.000 35 000 25,000 10.000 250,000 Selling expenses 18 50.000 $ 320 000 S 252.000 S 380.000 S367 500 S 490 500 S 1810 000 19 Total 20 4 Exhibit 7-5 Exhibit 7-6 Exhibit 7-7 Exhibit 7-9 Exhibit 7-10 Exhibit 7-11 Exhibit 7-11 (2) I Exhibit 7-5 shows that Customer Orders consume 25% of the resources represented by the $500,000 of indirected factory wages. 25% x $500,000 = $125,000 Other entries in the table are computed in a similar fashion.
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