Sign Up

Sign Up to our social questions and Answers Engine to ask questions, answer people’s questions, and connect with other people.

Sign In

Login to our social questions & Answers Engine to ask questions answer people’s questions & connect with other people.

Forgot Password

Lost your password? Please enter your email address. You will receive a link and will create a new password via email.

You must login to ask a question.

Please briefly explain why you feel this question should be reported.

Please briefly explain why you feel this answer should be reported.

Please briefly explain why you feel this user should be reported.

Share & grow the world's knowledge!

We want to connect the people who have knowledge to the people who need it, to bring together people with different perspectives so they can understand each other better, and to empower everyone to share their knowledge.

Golding Bank provided the following data about its resources and activities for its checking

Question:

Assigning Cost of Resources to Activities, Unbundling the General Ledger

Golding Bank provided the following data about its resources and activities for its checking account process:

ResourcesActivitiesClerical Hours
Supervision$78,000Processing accounts10,800
Phone and supplies94,000Issuing statements5,940
Salaries270,000Processing transactions7,560
Computer29,000Answering customer inquiries2,700
Total$471,000Total27,000

Computers are used only by issuing (20 percent) and processing transaction (80 percent) activities.

Phone and supplies are 60 percent customer inquiries with the other 40 percent divided equally among the remaining activities, including supervising the checking operation.

The supervisor spends 100 percent of his time on supervision. In addition to the 27,000 clerical hours, there are 2,000 hours of supervision used (the hours used by the supervising clerks activity, which is not listed above).

Calculate the cost of each activity.

Cost Allocation Process:

In order to calculate the costs to assign to each activity cost pool, a company’s total overhead costs must be allocated to its activities using appropriate allocation bases that are relevant to the manner in which the costs are incurred.

Answer and Explanation:

We will:

  1. Allocate the cost of the supervision and the salaries cost to each activity based on the clerical hours. The hours used by the supervising clerks’ activity are not relevant here, because it does not make sense to allocate costs to it.
  2. Allocate the phone, supplies, and computer costs based on the percentage provided.
  3. Note that the percentage of clerical hours used by each activity is:
ActivitiesClerical HoursPercentage of total
Processing accounts10,80040%
Issuing statements5,94022%
Processing transactions7,56028%
Answering customer inquiries2,70010%
Total27,000100%

Now we can allocate the costs:

ActivitiesSupervision cost allocatedPhone and supplies cost allocatedSalaries cost allocatedComputer cost allocatedTotal cost allocated
Processing accounts= $78,000 × 0.40 = $31,200= $94,000 × 0.40 ÷ 3 = $12,533= $270,000 × 0.40 = $108,000= $29,000 × 0 = $0$151,733
Issuing statements= $78,000 × 0.22 = $17,160= $94,000 × 0.40 ÷ 3 = $12,533= $270,000 × 0.22 = $59,400= $29,000 × 0.20 = $5,800$94,893
Processing transactions= $78,000 × 0.28 = $21,840= $94,000 × 0.40 ÷ 3 = $12,534= $270,000 × 0.28 = $75,600= $29,000 × 0.80 = $23,200$133,174
Answering customer inquiries= $78,000 × 0.10 = $7,800= $94,000 × 0.60 = $56,400= $270,000 × 0.10 = $27,000= $29,000 × 0 = $0$91,200
Total$78,000$94,000$270,000$29,000$471,000

Related Posts

Leave a comment

Latest News & Updates

QuizlyPro Latest Articles

McMann Solutions Inc. knowingly violates the Clean Water Act by discharging hazardous pollutants into a nearby river

McMann Solutions, Inc., knowingly violates the Clean Water Act by discharging hazardous pollutants into a nearby river. McMann Solutions is subject to a. neither a fine or imprisonment. b. fines but no criminal charges or imprisonment because a corporation cannot ...

Farm and Ranch Supply Co. discovers a cache of an unknown herbicide in a back corner of its warehouse

Farm and Ranch Supply Co. discovers a cache of an unknown herbicide in a back corner of its warehouse. Farm and Ranch repackages the product, relabeling it as “Farmer’s Friend” and stating on the label and in advertisements that it ...

Tiger Stripe owns and operates gasoline filling stations. Patrick’s Trucking delivers fuel to Tiger Stripe’s storage facility on a regular basis

Tiger Stripe owns and operates gasoline filling stations. Patrick’s Trucking delivers fuel to Tiger Stripe’s storage facility on a regular basis. On one occasion, Patrick fails to pay proper attention to his truck when he is unloading fuel into Tiger ...

Explore Our Blog