Co-op Bank
Case Analysis Report
The Co-operative Bank
Submitted to
Wila-sini Wongkaew, PhD
Prepared by
Pitchapa Nuancharoen 578 20011 26
Pitchaya Wijitthanakul 578 20034 26
Pimpika Hitakomate 578 20108 26
Pattarin Ha-upala 578 20200 26
Salila Junsuriyapong 578 21144 26
Supattana Srisalaui 578 21282 26
2601633 Advanced Managerial Accounting and Cost Management
Semester 2 Academic Year 2014
Executive Summary
This report provides an analysis and evaluation of the cost system of The Co-operative Bank. Method of analysis is Internal Environment analysis.
As the regulation had been more relaxed in the bank industry, cost accounting became more important due to aggressive competition among banks. Traditional volume based costing is obviously inappropriate. Therefore, the Bank changed to activity-based costing (ABC).
We find that the implementation of activity-based costing (ABC) enhanced the ability to identify profitable products and customers but it had some weakness as follows:
1. ABC implementation was too costly, time-consuming and complex.
2. Too small sample from past data might affect the accuracy of its cost driver rate and not sufficient for decision making.
3. The 15% of bank’s expense being sustaining costs were not allocated to any products due to irrelevant causing too high administrative cost.
Recommendations discussed include:
1. The bank should regroup 235 activities for those with the same characteristics.
2. The team should extend data collecting range since there were a few transactions occurred in three months and use the most recent data.
3. The bank should allocate sustaining cost by using dual-rate cost allocation method.
4. The bank should follow up the service quality to ensure that customers receive what it used to be.
5. The management should increase sales for profitable products. Then unprofitable products, we suggest the firm reduce non-valued added cost.
The Co-operative Bank
Submitted to
Wila-sini Wongkaew, PhD
Prepared by
Pitchapa Nuancharoen 578 20011 26
Pitchaya Wijitthanakul 578 20034 26
Pimpika Hitakomate 578 20108 26
Pattarin Ha-upala 578 20200 26
Salila Junsuriyapong 578 21144 26
Supattana Srisalaui 578 21282 26
2601633 Advanced Managerial Accounting and Cost Management
Semester 2 Academic Year 2014
Executive Summary
This report provides an analysis and evaluation of the cost system of The Co-operative Bank. Method of analysis is Internal Environment analysis.
As the regulation had been more relaxed in the bank industry, cost accounting became more important due to aggressive competition among banks. Traditional volume based costing is obviously inappropriate. Therefore, the Bank changed to activity-based costing (ABC).
We find that the implementation of activity-based costing (ABC) enhanced the ability to identify profitable products and customers but it had some weakness as follows:
1. ABC implementation was too costly, time-consuming and complex.
2. Too small sample from past data might affect the accuracy of its cost driver rate and not sufficient for decision making.
3. The 15% of bank’s expense being sustaining costs were not allocated to any products due to irrelevant causing too high administrative cost.
Recommendations discussed include:
1. The bank should regroup 235 activities for those with the same characteristics.
2. The team should extend data collecting range since there were a few transactions occurred in three months and use the most recent data.
3. The bank should allocate sustaining cost by using dual-rate cost allocation method.
4. The bank should follow up the service quality to ensure that customers receive what it used to be.
5. The management should increase sales for profitable products. Then unprofitable products, we suggest the firm reduce non-valued added cost.
References: Cooper & Kaplan. Applying ABC to Service Industries. In The Design of Cost Management System ,p.454-461. Prentice Hall, 1995. Ruhl, J. M. and B. P. Hartman. 1998. Activity-Based Costing in the Service Sector. Advances in Management Accounting [Online]. Available from : http://maaw.info/ArticleSummaries/ArtSumRuhlHartman98.htm [2015,March 7] วิวัฒน์ อภิสิทธิ์ภิญโญ. การปันส่วนต้นทุนเพื่อการควบคุมและการบริหาร. [ออนไลน์]. 2553. แหล่งที่มา: http://www.thailandindustry.com/guru/view.php?id=12151 [7 มีนาคม 2558]