Question

Calculating ABC Unit Costs Perkins National Bank has collected the following information for four activities and two types of credit cards: Activity Driver Classic Gold Activity Rate ($) Processing transactions Transactions processed 12,000 7,200 0.20 Preparing statements Number of statements 12,000 7,200 0.95 Answering questions Number of calls 24,000 36,000 4.00 Providing ATMs ATM transactions 48,000 14,400 1.50 There are 5,200 holders of Classic cards and 20,800 holders of the Gold cards. Required: Calculate the unit cost (rounded to the nearest cent) for Classic and Gold credit cards. Unit cost for Classic $ 35.65 Unit cost for Gold $ 8.57 Feedback

Answer 1

Answer:

The unit cost for classic and gold is $34,96 and $8.35 respectively.

Explanation:

The computation of the unit cost for classic is shown below:

= (Processing transactions × activity rate + Preparing statements ×  activity rate + Answering questions × activity rate + Providing ATMs × activity rate) ÷ number of holders

= (12,000 × 0.20 + 12,000 × 0.95 + 24,000 × 4.00 + 48,000 × 1.50) ÷ 5,200 holders

= (2,400 + 11,400 + 96,000 + 72,000) ÷ 5,200 holders

= 181,800 ÷ 5,200 holders

= $34.96

The computation of the unit cost for Gold is shown below:

= (Processing transactions × activity rate + Preparing statements ×  activity rate + Answering questions × activity rate + Providing ATMs × activity rate) ÷ number of holders

= (7,200 × 0.20 + 7,200 × 0.95 + 36,000 × 4.00 + 14,400 × 1.50) ÷ 20,800 holders

= (1,440 + 6,840 + 144,000 + 21,600) ÷ 20,800 holders

= 173,880 ÷ 20,800 holders

= $8.35