Finance and Account Essay

2126 Words May 6th, 2011 9 Pages
INTRODUCTION

The 1980s is known as the deregulation period for the banking industry and subsequently the increased competition of the 1980s and continuing in the 1990s. The themes of the 1980s and 1990s include total quality management, customer satisfaction, cost, quality and time, technology, market globalization, availability of capital and markets, and finally activity based costing. The purpose of this study is to summarize and analyze the implementation of ABC in the banking industry.
Total quality management (TQM) is a process of continuous improvement that focuses on increasing customer satisfaction. TQM is founded on the principle that every customer (internal or external) has a set of spoken or latent needs or requirements.
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CHARACTERISTICS OF BANK COSTS
Characteristics of bank costs include:
1. Variable Transaction Volume. A large portion of bank expenses are for personnel and equipment directly or indirectly involved in processing checks and other documents. However, the daily volume of checks handled fluctuates widely from one day of the week to the next, from month to month, and from one season to another.
2. Predictability. The predictability of check volume and how it fluctuates, has enabled many banks to schedule portions of their payroll costs to coincide with the anticipated volume of activity by using part-time clerks in the operations affected by the check activity.
3. Traceable Costs. Most bank costs are associated directly to either a fund-providing activity, a fund-using activity, or a nonfund activity. As a result, a bank usually has a reasonable basis for allocating its costs. For example, tellers, proof and transit clerks, and bookkeepers usually can be associated directly with the deposit function. The data center can be associated with specific activities on the basis of tasks it performs for those activities.
COSTING CONSEQUENCES
The significant costing consequences related to the characteristics described above follows. Because transaction volume is variable, the capacity of resources provided by the fixed costs may sometimes stand idle. If this idle capacity is to be part of the average unit costs, the period

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