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BNB Indirect Cost Allocation Overview

This document describes BNB's original single-allocation base system and activity-based costing (ABC) system used in a pilot study for allocating indirect costs. The original system allocated a total of $2,850 in indirect costs across retail and business customer lines using a single budgeted indirect cost rate. The ABC system separates indirect costs into three activities - check processing, teller services, and responding to customer inquiries - and allocates costs to customer lines based on cost drivers such as number of checks processed and customer calls for each activity. This provides more accurate allocation of indirect costs per customer account than the original single rate system.

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Joyal Thomas
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57 views2 pages

BNB Indirect Cost Allocation Overview

This document describes BNB's original single-allocation base system and activity-based costing (ABC) system used in a pilot study for allocating indirect costs. The original system allocated a total of $2,850 in indirect costs across retail and business customer lines using a single budgeted indirect cost rate. The ABC system separates indirect costs into three activities - check processing, teller services, and responding to customer inquiries - and allocates costs to customer lines based on cost drivers such as number of checks processed and customer calls for each activity. This provides more accurate allocation of indirect costs per customer account than the original single rate system.

Uploaded by

Joyal Thomas
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd

BNB’s Original Single-Allocation Base System

Major Components of Indirect costs Est. Cost


Salaries of Check-processing personnel $700
Depreciation on PPE used in check processing 440
Teller Salaries 1,000
Depreciation on PPE used in teller operations 200
Customer rep. salaries at the call center 450
Toll-free phone line + deprn. on related PPE 60

Total indirect costs 2,850

$ Value of
checks
processed

BICR1

Indirect Cost Allocation to Retail Indirect Cost Allocation to


Customer Line Business Customer Line

Indirect Cost per Retail Indirect Cost per Business


Customer Account Customer Account

1
Budgeted Indirect Cost Rate
BNB’s ABC System Used in the Pilot Study

Major Components of Indirect costs Est. Cost


Salaries of Check-processing personnel $700
Depreciation on PPE used in check processing 440
Teller Salaries 1,000
Depreciation on PPE used in teller operations 200
Customer rep. salaries at the call center 450
Toll-free phone line + deprn. on related PPE 60
Total indirect costs 2,850

Paying Checks Providing Teller Services Responding to Customer


Account Inquiries

# Checks # Teller # Customer


processed transactions calls

BICR BICR BICR

Retail Customer Line Business Customer Line

Check processing Check processing


Teller Transactions Teller Transactions
Customer Calls Customer Calls

Total indirect costs Total indirect costs

Indirect Cost per Retail Indirect Cost per Business


Customer Account Customer Account

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