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Costos Abc

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5-7 The Buckeye National Bank (Activity-Based Costing in the Service Sector)

ABSTRACT: The U.S. Bureau of the Census projects that by 2006, the service sector will employ 74 percent of the workforce. This case illustrates why a major segment of the service sector—banks—needs accurate cost information to make strategic decisions, and how more refined accounting systems help fulfill this need. Buckeye National Bank is a hypothetical bank that has suffered falling profits despite a shift in customer base toward retail customers, which the current information system reports are more profitable than business customers. Following a step-by-step approach, you will develop the Bank’s average cost of serving a retail customer account and a business customer account, under (1) the Bank’s traditional single allocation base system, and (2) a (pilot test) activity-based costing system. You will analyze these results to determine how and why costs reported by the activity-based system differ from the costs reported by the traditional system, and what this difference means for the Bank’s business strategy. Finally, you will consider how the Bank’s managers can use the new, more refined activity-based cost data in strategic decision making, including controlling costs and developing more profitable business strategies.

TEACHING NOTES

Background and Purpose
Textbook illustrations and pedagogical cases on activity-based costing (ABC) typically focus on manufacturing applications.[1] However, the U.S. Bureau of the Census projects approximately 74 percent of the workforce will be employed in the service sector by 2006 (U.S. Bureau of the Census 1999). Furthermore, ABC and customer costing are increasingly popular among service organizations such as financial institutions and health care organizations. This structured case uses a customer-costing context to

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