Cooperative Bank Managment

 Inception of the Bank was in 1872 as a Co-op   

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Wholesale Society First 75 years – served the treasury needs of CWS 1940-1971 – Expands Branch Networks 1971- Formed as a Separate Legal Entity Challenges of Declining Deposit Base, Dwindling Asset Base, Sustainable Capital Growth, New Competitors, Less Repeat Customers Re-structuring of Operations, Sales and Business

Q1) The Co-operative Bank is our first experience with an ABC project applied to service organisation, what new issues if any arise when applying ABC analysis to service business?

Activity-based costing (ABC) is a costing model that identifies activities in an organization and assigns the cost of each activity resource to all products and services according to the actual consumption by each: it assigns more indirect costs (overhead) into direct costs

.en.wikipedia.org/wiki/Activity-based_costing

 Activity-based costing ("ABC") a superior method for allocating overhead

costs

 Manufacturing industry Vs the service industry  Service firms usually have high overhead costs and are labor intensive.

Challenges

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All operating expenses cannot be assigned to banking products Difficult to assign costs to each product or activity Assigning ABC to individual customers could be challenging Implementation of ABC might directly and adversely affect the service levels of the bank if cost cutting measures are adopted on the basis of ABC. Service organization or a bank has multiple activities.

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Products offered in Service Industry are non-measurable hence it is cumbersome and difficult to distribute and allocate activity costs to each of them

Even in activity-based costing, some overhead costs are difficult to assign to products and customers, such as the chief executive's salary. These costs are termed 'business sustaining' and are not assigned to products and customers because there is no meaningful method. This lump of unallocated overhead costs...