Determine the cost per unit of activity for each activity

Assignment Help Accounting Basics
Reference no: EM131772499

Question - ABC Costing for a Service Organization

First Mortgage Company is a full-service residential mortgage company in the Baltimore area that operates in a very competitive market. The manager, Richard Sissom, is concerned about operating costs associated with processing mortgage applications and haas decided to install an ABC costing system to help him get a handle on costs. Although labor hours seems to be the primary driver of the cost of processing a new mortgage, the labor cost for the different activities involved in processing new loans varies widely. The Accounting Department has provided the following data for the company's five major cost pools for 2009.

Activity Cost Pools



Activity Drivers


Taking Customer Applications

$300,000


Time-Assistant Managers

12,000 hours

Conducting credit investigations

450,000


Time-Credit Managers

16,500 hours

Underwriting

500,000


Time-Underwriting Department

10,000 hours

Preparing loan packages

200,000


Time-Processing Department

10,000 hours

Closing loans

600,000


Time-Legal Department hours

6,000 hours


$2,050,000



54,500 hours

During 2009, the company processed and issued 5,000 new mortgages, two of which are summarized here with regard to activites used to process the mortgages.


Loan 5066

Loan 5429

Application processing hours

1.5

2.75

Credit investigating hours

4

3

Underwriting hours

2.5

4.75

Processing hours

3.5

3

Legal processing hours

1.5

1.5

Total Hours

13

15

Question:

a) Determine the cost per unit of activity for each activity cost pool.

b) Determine the cost of processing loans 5066 and 5429.

c) Determine the cost of preparing loans 5066 and 5429 assuming that an average cost per hour for all activates is used.

Reference no: EM131772499

Questions Cloud

Preferred form of securities for funding : The most preferred form of securities for funding by firms in the U.S. has been
Calculate the cost of the ending inventory : Calculate the cost of the ending inventory and the cost of goods sold for each cost flow assumption
Create and describe a diagram of the network architecture : Create and describe a diagram of the network architecture, discussing how it can meet the goals of the company.
Calculating the sample proportion for the poll : Assuming a proper random sample was used, verify that the sample proportion for the poll taken in 1976 almost certainly represents the population proportion.
Determine the cost per unit of activity for each activity : Determine the cost per unit of activity for each activity cost pool. Determine the cost of processing loans 5066 and 5429
Draw a picture of the possible sample proportions : Draw a picture of the possible sample proportions. Illustrate where the sample proportion of .17 falls on the picture. Use this to confirm your answer.
Describe the type of product testing that will take place : Describe the type of product testing that will take place for this project at a summary level in the opening paragraph of this section.
Determine the accumulated probability : Determine the accumulated probability that you will have found someone with your birth month by the time you ask the fifth person.
Assume the relevant interest rate : How much will be available to Jennifer on her 18th birthday? Assume the relevant interest rate is 7.1% per year. Enter your answer to the nearest cent.

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd