ABC, product costing at banks, cross-subsidization. First International Bank (FIB) is examining the profitability of its Premier Account, a combined savings and checking account. Depositors receive a 7% annual interest rate on their average deposit. FIB earns an interest rate spread of 3% (the difference between the rate at which it lends money and the rate it pays depositors) by lending money for home loan purposes at 10%. Thus, FIB would gain $60 on the interest spread if a depositor had an average Premier Account balance of $2,000 in 20x5 ($2,000 X 3% = $60). The Premier Account allows depositors unlimited use of services such as deposits, withdrawals, checking accounts, and foreign currency drafts. Depositors with Premier Account balances of $1,000 or more receive unlimited free use of services. Depositors with minimum balances of less than $1,000 pay a $20- permonth service fee for their Premier Account. FIB recently conducted an activity-based costing study of its services. It assessed the following costs for six individual services. The use of these services in 20x5 by three customers is as follows: Activity-Based Cost De - osit/withdrawal with teller $2.50 Dc-ostt/withdrawal with ATM $080 Deposit/withdrawal on prearranged monthly $0.50 -\" basis Bank checks written 1- Forct.n cnncnc drafts mm In- nines about account balance \" Avera_e Premier Account balance for 2005 Assume Robinson and Farrel always maintain a balance above $1,000, whereas Skerrett always has a balance below $1,000. Required: 1. Compute the 20x5 profitability of the Robinson, Skerrett, and Farrel Premier Accounts at FIB. 2. What evidence is there of cross-subsidization among the three Premier Accounts? Why might FIB worry about this crosssubsidization if the Premier Account product offering is profitable as a