Refer to the interview in Exercise 4.16 (especially to Questions 4 and 7). The general ledger reveals the following annual costs

Refer to the interview in Exercise 4.16 (especially to Questions 4 and 7). The general ledger reveals the following annual costs:

Supervisor’s salary ………….. $ 64,600

Clerical salaries ………….. 210,000

Computers, desks, and printers …. 32,000

Computer supplies ………….. 7,200

Telephone expenses ………….. 4,000

ATM …………..………….. 1,250,000

All non-labor resources, other than the ATM, are spread evenly among the eight credit department employees (in terms of assignment and usage). Credit department employees have no con- tact with ATMs. Printers and desks are used in the same ratio as computers by the various activities.

Required:

1. Determine the cost of all primary and secondary activities.

2. Assign the cost of secondary activities to the primary activities.

SOLUTION

1. Labor cost is assigned to the activities using direct tracing and a resource driver (percentage of time):

Supervising employees $64,600 (direct tracing)

Processing transactions $84,000 (0.40 × $210,000)

Issuing statements $63,000 (0.30 × $210,000)

Answering questions $63,000 (0.30 × $210,000)

Computer, desk, and printer resources are divided evenly among the labor types and then assigned to activities using direct tracing and a resource driver (percentage of computer time):

Supervising employees* $ 4,900 (direct tracing)