ACCT 230 Spring 2010 Assignments Assignment 1 (Cost Classification) (10 points) 2-34 Income statement and schedule of cost of goods manufactured. The...

Activity Based CostingTo increase its share of the checking account market, Columbia City Bank in Seattle took two actions: it established a customer call center to respond to customer inquiries about account balances, checks cleared, fees charged, etc., and it paid year-end bonuses to branch managers who met their branch’s target increase in the number of customers. While 80% of the branch managers met the target increase in the number of customers, Columbia City Bank’s profits continued to decline. John Diamond, the CEO, didn’t understand why profits were declining, even though the bank was serving more customers. The Pierce County branch manager, Rose Perez, noticed that while small retail customers flocked to the bank, the number of business customers was declining.Columbia City Bank’s costing system, developed back in 1988, is straightforward. No costs are traced directly to customers. The bank simply assigns the total indirect costs to customer lines (retail customer line or business customer line) based on the total number of checks processed.Perez suspected that Columbia City Bank’s cost system might be part of the problem. Perez learned about ABC in school, but the applications involved manufacturing firms. She wonders whether Columbia City Bank could develop an ABC system, with the customer-line as the primary cost object.Rose’s boss was skeptical. (“Our profits are going down the tubes and you want me to spend money developing a new accounting system?”) However, Rose persuaded her boss to allow a pilot ABC study, using the three Tacoma branches for the pilot test.The ABC implementation team included Perez, the managers of each of the three Tacoma branches, a bank teller, and a customer service representative from the customer call center. The team began by identifying the following three activities:•