friendly bank is in the process of implementing an activity base 272262

Friendly Bank is in the process of implementing an activity based costing system. A copy of an interview with the manager of Friendly’s credit card department follows:.

Question 1: How many employees are in your department?

Response: There are eight employees, including me.

Question 2: What do they do (please describe)?

Response: There are four major activities: supervising employees, processing credit card transactions, issuing customer statements, and answering customer questions.

Question 3: Do customers outside your department use any equipment?

Response: Yes. ATMs service customers who require cash advances.

Question 4: What resources are used by each activity (equipment, materials, energy)?

Response: We each have our own computer, printer, and desk. Paper and other supplies are needed to operate the printers. Of course, we each have a telephone as well.

Question 5: What are the outputs of each activity?

Response: Well, for supervising, I manage employees’ needs and try to ensure that they carry out their activities efficiently. Processing transactions produces a posting for each transaction in our computer system and serves as a source for preparing the monthly statements. The number of monthly customer statements has to be the product for the issuing activity, and I suppose that the number of customers served is the output for the answering activity. And I guess that the number of cash advances would measure the product of the ATM activity, although the ATM really generates more transactions for other products such as checking and savings accounts. So, perhaps the number of ATM transactions is the real output.

Question 6: Who or what uses the activity output?

Response: We have three products: classic, gold, and platinum credit cards.

Transactions are processed for these three types of cards, and statements are sent to clients holding these cards. Similarly, answers to questions are all directed to clients who hold these cards. As far as supervising, I spend time ensuring the proper coordination and execution of all activities except for the ATM. I really have no role in managing that particular activity.

Question 7: How much time do workers spend on each activity? By equipment?

Response: I just completed a work survey and have calculated the percentage of time for each worker. All seven clerks work on each of the three departmental activities. About 40 percent of their time is spent processing transactions, with the rest of their time split evenly between issuing statements and answering questions. Phone time for all seven workers is used only for answering client questions. Computer time is 70 percent transaction processing, 20 percent statement preparation, and 10 percent question answering. Furthermore, my own time and that of my computer and telephone are 100 percent administrative. Credit card transactions represent about 20 percent of the total ATM transactions.

Required:

Prepare an activity dictionary using five columns: activity name, activity description, activity type (primary or secondary), cost object(s), and activity driver.