Cost Management Essay example

Words: 2512
Pages: 11


Our case study is on the Columbia City Bank. First of all we would like to talk about the general inner workings of a bank. A bank generates a profit from the differential between the level of interest it pays for deposits and other sources of funds, and the level of interest it charges in its lending activities. In recent history, investors have demanded a more stable revenue stream and banks have therefore placed more emphasis on transaction fees, primarily loan fees but also including service charges on an array of deposit activities and ancillary services. Lending activities, however, still provide the bulk of a commercial bank's income. Beside, Banks make money from card products through interest payments and fees
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s costs:

Activity: Teller salaries: RM 1200 000

Total Teller transaction costs: RM 1200 000

Allocation rate for teller transactions:

Total teller transaction costs/ total number of teller transactions

RM 1200 000/400 000 = RM 3 per teller transaction

Customer service call center, activity rate is the number of calls

Retail Customers: 95,000

Business Customers: 5000

Total number of customer calls to all centers: 100,000

Costs of customer calls to call retailers:-

Activity: Tall-Free phone lines at customer call center: RM60,000

Salaries and customer's representation at call center: RM450,000

Total cost of customer calls to call center: RM510,000

Allocation rate for customer service call center:

Total costs of customer calls to call center / Total number of customer calls

RM510,000/100,000 = RM5.10 per customer call to call center


|Activity |ABC rate |Total Indirect Cost Assigned to |Total Indirect Cost Assigned to |
| | |Retail Customer line |Business Customer line |
|Check Payments |RM0.10 |2,280,000 x RM0.10 =RM228,000 |9,120,000 x RM0.10 =RM921,000 |
|Teller Withdrawal and Deposits |RM3.00