The Trust Department of First National Bank offers two types ofservice, Basic and Premier. Trust customers with basic service donot grant trust officers any discretion in managing their accounts.The trust officers or their assistants merely execute the actionsprescribed by the customer and send monthly statements. Premiercustomers grant the trust officers broad discretion in managingtheir accounts, including the buying, selling, and distribution oftrust assets.

   For years, the Trust Department’s vice presidentassumed that the cost of these services was based on the amount oftime the trust officers spent working on the accounts. But aftersome ebbs and flows in the market and the advent of varioussoftware packages for executing transactions, the vice presidenthas begun to suspect that the costs of the services may haveshifted. He has gathered the following information about theactivities required by each service:

Using the traditional method of allocating Trust Departmentcosts, which is based on trust officer labor hours, compute thecost per account to provide services to Basic and Premiercustomers. (Round cost per hour and final answers to 2decmial places, e.g. 15.25.)

Activity Pool


Department Costs


Cost Driver

Basic account maintenance






Number of accounts

Transaction processing






Number of transactions

Account analysis






Trust officer labor hours

Total Trust Department costs









Other information is as follows:






Number of accounts





Number of transactions





Total trust officer labor hours






Source link

Leave a Reply

Your email address will not be published. Required fields are marked *