Rock Solid Bank and Trust (RSB&T) offers only checking accounts. Customers can write checks and use a
Question:
Rock Solid Bank and Trust (RSB&T) offers only checking accounts. Customers can write checks and use a network of automated teller machines. RSB&T earns revenue by investing the money deposited; currently, it averages 5.2 percent annually on its investments of those deposits. To compete with larger banks, RSB&T pays depositors 0.5 percent on all deposits. A recent study classified the bank's annual operating costs into four activities:
Data on two representative customers follow:
Required
a. Compute RSB&T's operating profits.
b. Compute the profit from Customer A and Customer B, assuming that customer costs are based only on deposits. Interest costs = 0.5 percent of deposits; operating costs are 4 percent (= $7,500,000/$187,500,000) of deposits.
c. Compute the profit from Customer A and Customer B, assuming that customer costs are computed using the information in the activity-based costinganalysis.
Step by Step Answer:
Fundamentals of Cost Accounting
ISBN: 978-0077398194
3rd Edition
Authors: William Lanen, Shannon Anderson, Michael Maher