3310solmod19

3310solmod19 - Module 19 Answers 9-3. Value-added...

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Module 19 Answers 9-3. Value-added activities add value to the product or service whereas nonvalue- added activities do not add value. By identifying activities that do not add value, management is able to focus on eliminating or reducing nonvalue-added activities. By identifying value-added activities, management knows which activities to retain and make more efficient. Common nonvalue-added activities include storing materials, reworking defective units, correcting purchase orders that are incorrect, and moving materials and products. 9-21. (30 min.) Activity-Based Costing of Customers: Rock Solid Bank & Trust a. Revenues . ....................... $250,000,000 x 6% $15,000,000 Costs: Interest on deposits . .... $250,000,000 x 1% 2,500,000 Operating costs . ......... (Given) 10,000,000 Total costs . ...................... 12,500,000 Operating profit. ............... $2,500,00 b. Customer A Customer B Deposit $250 $8,000 Revenue $15.00 a $480.00 Interest on deposits 2.50 b 80.00 Operating costs 10.00 c 320.00 Customer profit $2.50 $80.00 a $15.00 = $250 deposit x 6%. b $2.50 = $250 deposit x 1%. c $10.00 = $250 deposit x 4% operating cost to deposit ratio (= $10,000,000 ÷ $250,000,000).
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9-21. (continued) c. Activity Cost Driver Cost Driver Volume Rate Use ATM Number of uses $1,000,000 ÷ 10,000,000 = $0.10 per use Visit branch Number of visits 3,000,000 ÷ 750,000 = $4 per visit Process transaction Number of transactions 2,000,000 ÷ 40,000,000 = $0.05 per transaction General bank overhead
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This note was uploaded on 11/13/2008 for the course ACCT 305 taught by Professor Franz during the Spring '07 term at S.F. State.

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3310solmod19 - Module 19 Answers 9-3. Value-added...

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