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Happy Banking Company has ten automatic teller machines (ATM) spread throughout the city
maintained by the ATM Department. You have been assigned the task of determining
the cost of operating each machine. Management will use the information you develop
to evaluate the desirability of continuing to operate each machine and/or changing
security arrangements for a particular machine.
The ATM Department consist of a total of six employees: a supervisor, a head cashier,
two associate cashiers, and two maintenance personnel. The associate cashiers make
between two and four daily trips to each machine to collect and replenish cash and to
replenish supplies, deposit tickets and so forth. Each machine contains a small computer
that automatically summarizes and reports transactions to the head cashier. The
head cashier reconciles the activities of the two associate cashiers to the
computerized reports. The supervisor, who does handle cash, reviews the reconciliation.
When an automatic teller's computer, a customer, or a cashier reports a problem, the
two maintenance employees and one cashier are dispatched immediately. The cashier
removes all cash and transaction records, and the maintenance employees repair the
machine.
Monthly operating costs and information on percentage of time that used in activities for a recent month follows:
Operating costs:						Routine Trip Related Activity percentage	Maintenance-related activities percentage
Supervisor Salary				$5,000		61%	39%
Head cashier Salary			4,000		78%	22%
Associate cashiers Salary ($1,800 each Assoc. cashier)		3,600		50%	50%
Maintenance workers salary			3,630			100%
Cashiers' service vehicle-used for Routine trips		1,682		100%
Maintenance service vehicle-used for maintenance activities	1,545			100%
Office rent and utilities-used equally preparing for routine and maintenance activities	1,576		50%	50%
Machine lease, space rent, and utilities ($1,700 each machine)	17,000
Total operating cost for month			$38,033
Related monthly activity information for this month follows:
Machine	Routine Trips	Maintenance Hours
1	35	6
2	90	17
3	60	15
4	80	30
5	75	15
6	30	10
7	90	25
8	20	5
9	60	20
10	40	7
	580	150
Additional Information follows:
1. The office is centrally located with about equal travel time to each machine.
2. Maintenance hours include travel time.
3. The cashiers' service vehicle is used exclusively for routine visits.

a. Determine the monthly operating costs of a machine when cost assignments are
based on the number of machines. Conceptually this is like the plantwide overhead rate per unit.
Hint: Do not make this complicated, since you are given the total operating cost and know there are 10 machines.

b. You have determined that ABC would be a more effective costing method. You have decided to
split the costs into 3 activities: Routine trip, maintenance, and machine lease-space rent-utilities.
Develop an analysis to determine the activity rates for each of the 3 activities.
Round answers to the nearest cent.
							Routine Trips	Maintenance	Machine lease, space rent, and utilities
	Supervisor Salary
	Head cashier Salary
	Associate cashiers Salary ($1,800 each Assoc. cashier)
	Maintenance workers salary
	Cashiers' service vehicle-used for Routine trips
	Maintenance service vehicle-used for maintenance activities
	Office rent and utilities-used equally preparing for routine and maintenance activities
	Machine lease, space rent, and utilities ($1,700 each machine)
	Total per activity
	Quantity of activity
	Unit activity rates

c. Determine the operating costs assigned to each machine when
activity-based costing is used.
	Machine	Routine Trips	Maintenance	Machine lease, space rent, and utilities	Total
	1
	2
	3
	4
	5
	6
	7
	8
	9
	10
	Total

d. How can ABC cost information by used by this banking company to improve overall

management of monthly operating costs?

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