Buckeye National Bank Case Study

Good Essays
Buckeye National Bank

1. a) PDOR- Est. MOH/Est. Act. (Total indirect costs/total value of checks processed)
$2,850,000/$95,000,000= $0.03 per dollar processed.
b) (i) Retail Line—(Value of checks processed X cost per dollar processed)
$9,500,000 X $0.03= $285,000 (ii) Business Line $85,500,000 X $0.03= $2,565,000 The allocations are driven by the dollar value of the checks processed. c) (i) Total indirect cost proportion for Retail Line (Allocation amount/Est. MOH) $285,000/$2,850,000= 10% (ii) Total indirect cost proportion for Business line $2,565,000/$2,850,000= 90% The original system assumed that indirect costs are incurred in direct proportion to the dollar value of the checks processed. This allocation is approximately accurate only if the indirect costs in Exhibit B are incurred in direct proportion to the dollar value of the checks each customer line writes. d) (i) Annual indirect cost per Retail account. (Allocated indirect costs/number of accounts) $285,000/150,000= $1.90 per account (ii) Annual indirect cost per Business account $2,565,000/50,000= $51.30 per account e) (i) Contribution to profit per Retail account (Revenue per account minus cost per account) $10.00 - $1.90= $8.10 (ii) Contribution to profit per Business account $40.00 - $51.30= ($11.30) This suggests Buckeye National Bank should pursue a strategy that increases the retail-customer base because the original cost system shows retail customers are profitable, but business customers are not. 2. One sign that the cost allocation system is broken is the amount of allocated cost per business account. When you have such few accounts but allocate based on the total dollar value of checks processed, you over allocate for the business line. The old cost system is a single-allocation-based system. 3. New Activity based costing system Activity Pool | Estimated MOH | / | Estimated Activity | = | PDOR | Paying

You May Also Find These Documents Helpful

  • Good Essays

    Buckeye National Bank

    • 1140 Words
    • 4 Pages

    Buckeye National Bank 1. Under the traditional (old) cost system: a. Compute the single indirect cost allocation rate that the bank would use to allocate the total indirect costs presented in Exhibit B. (Total indirect costs/total value of checks processed, in thousands) $2,850 / $95,000 = $0.03 b. Use your answer to part A to determine the total annual indirect cost assigned to: i. The retail customer line (Value of checks processed X cost per dollar processed, in thousands), and $9,500 * $0.03…

    • 1140 Words
    • 4 Pages
    Good Essays
  • Good Essays

    Buckeye National Bank

    • 935 Words
    • 4 Pages

    Activity Based Costing in the Service Sector: The Buckeye National Bank 1. a) single indirect cost allocation rate: total indirect costs/total amount of checks processed $2,850,000/$95,000,000 = $0.03 per dollar processed b) total annual indirect cost assigned to the retail customer line and the business customer line: amount of checks processed x allocation rate = total indirect costs $9,500,000 x $0.03 = $285,000 (retail customers) $85,500,000 x $0.03 = $2,565,000 (business customers)…

    • 935 Words
    • 4 Pages
    Good Essays
  • Good Essays

    CHAPTER 1 INTRODUCTION 1.1 Background of Study As we all know, in order to get the papers, man-made will be needed to cut off the tree like the forest which is the source to produce papers and it will give a bad impact for all creatures for instance human, animal as well as their habitat which might result in extinction since it will affecting environment such as global warming. As according to (Nasa, 2016) warming modifies rainfall patterns, amplifies coastal erosion, lengthens the growing season…

    • 2278 Words
    • 10 Pages
    Good Essays
  • Satisfactory Essays

    QUAKER NATIONAL BANK A Case Analysis Group # 5 July 29, 2013 I. POINT OF VIEW It is the point of view of the executive vice president of Quaker Bank – Mr. Matthew Killian. II. STATEMENT OF THE PROBLEM The crisis of the executive vice president – Mr. Killian is on how to properly manage risks of Quaker National Bank. III. AREAS OF CONSIDERATION First to consider is the bank's judgment of the exposure to credit, interest rate and liquidity risk to be excessive in relation…

    • 426 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    Executive Summary The Canadian National Bank is a case involving employee grievances and ethical issues. On February 26, 1997, Lesley Mahon was shocked and upset about the serious allegation complained formally by her subordinate—Pam Stewart to the "National Committee for Employee Concerns"(NCEC). She was wondering if there was any action to take to solve the problem. This situation was a breakout of their conflicts in a long period. The main two causes of the issues were Lesley’s leadership and…

    • 1067 Words
    • 5 Pages
    Good Essays
  • Powerful Essays

    TABLE OF CONTENT 1 | Introduction | 2 | 2 | Question 1 | 3 | 3 | Question 2 | 4 | 4 | Question 3 | 6 | 5 | Question 4 | 9 | 6 | Question 5 | 11 | 7 | Conclusion | 12 | INTRODUCTION Century National Bank has offices in several cities in the Midwest and the southeastern part of the United States. Mr. Dan Selig, president and CEO, would like to know the characteristics of his checking account customer. To better understand the customers, Mr. Selig asked Ms. Wendy Lamberg, director…

    • 2139 Words
    • 9 Pages
    Powerful Essays
  • Good Essays

    You run a risk giving an inexperienced tower the right to tow away your vehicle. Doing so would be one way to turn a towing emergency into an even more frustrating situation. The professionals at Buckeye Riverside Towing know this to be true. Located in Cincinnati, OH, Buckeye Riverside Towing is a heavy duty towing company that offers 24-hour and emergency towing services throughout the Cincinnati, Northern Kentucky, and Southeastern Indiana regions. They have the experience it takes to keep clients…

    • 350 Words
    • 2 Pages
    Good Essays
  • Satisfactory Essays

    Contemporary Brand Management Assignment Student id- c7080650 Course-BA [Hons] business and management. List of Contents Page 1. The Brand…………………………………………………………………… 1.1 what is a brand? 1.2 Audi: commodity, product, company, Brand? 1.3 Audi : Major Characteristics. 1.4 Brand Architecture of Audi. 2. Brand Positioning…………………………………………………………... 2.1 Theoretical Approach. 2.2 Positioning Statement of Audi…

    • 4107 Words
    • 17 Pages
    Satisfactory Essays
  • Powerful Essays

    National Bank

    • 19810 Words
    • 73 Pages

    in National Bank Limited, Foreign Exchange Branch. This research report is aimed at providing a comprehensive picture to the areas of Foreign Exchange operation of National Bank Limited. The report has been divided into twelve parts. These are- Introduction, Brief History of Banking Sector of Bangladesh, Corporate review of NBL, Foreign Exchange, Documents Used in Foreign Exchange Business, Letter of Credit (L/C), Import, Export, Foreign Remittance, Findings and Analysis, References. National Bank…

    • 19810 Words
    • 73 Pages
    Powerful Essays
  • Powerful Essays

    First National Bank | A Case Study “If we don't change, we don't grow. If we don't grow, we aren't really living.” -Gail Sheehy | Amil, Paula BiancaIsidoro, Joanna MarieRojas, RobertSampang, Makrene LaraSeptember 17, 2010Prof. Aliza Racelis | ------------------------------------------------- EXECUTIVE SUMMARY ------------------------------------------------- Point of View: Sammy Viray, New FNB President ------------------------------------------------- -------------------------------------------------…

    • 1456 Words
    • 6 Pages
    Powerful Essays