Compute indirect cost allocation rate per check processed

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Reference no: EM132475922

On average, Belltown National Bank earns revenue from each type of account (from interest earned on checking account balances) as follows:

Average annual revenue per retail customer account $10

Average annual revenue per business customer account $40

1. Using the original (traditional) cost system:

Question a) Compute the indirect cost allocation rate per check processed.

Question b) Determine the total indirect cost assigned to (1) the retail customer line and (2) the business customer line.

Question c) Compute the proportion of the total indirect cost assigned to (1) the retail customer line and (2) the business customer line.

Question d) Determine (1) the indirect cost per retail account and (2) the indirect cost per business account.

Question e) Assuming that there are only indirect costs and no direct costs, compute the average profit per account for retail customers and for business customers.

Question f) Using only the cost and profitability information from the traditional costing system, how would you expect profitability to change as you add i) retail customers, or ii) business customers? What business strategy (or strategies) would you suggest based on this traditional system?

Attachment:- per check process.rar

Reference no: EM132475922

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