Banks are conscious of the costs they incurred for maintaining checking accounts. It is customary to charge customers either a monthly fee for a basket of services or transaction$-$based fees. As their accounting systems became more sophisticated, banks looked for ways to price discriminate between different types of depositors.

Pitt National Bank has requested an analysis of its costs for servicing checking accounts. It has broadly grouped its depositors into three categories, depending on their average daily account balances: low balance, medium balance and high balance. The analysis that was conducted revealed the following activity costs associated with the servicing of checking accounts at Pitt:

Cost of opening and closing accounts $ $200,000$

Cost of issuing monthly statements $ $300,000$

Cost of processing transactions $$2,050,000$

Cost of customer inquiries $ $400,000$

Cost of ATM services $$1,120,000$

Total service costs $$4,070,000$

The following data on driver volumes was also collected:

Type of Depositor$\_\_\_\_\_\_\_\_\_$

Low Medium High

Number of checking accounts $38,0008,0004,000$

Number of accounts opened$/$closed $15,0003,0002,000$

Number of transactions processed $18,000,0002,000,000500,000$

Number of telephone minutes $1,000,000600,000400,000$

Number of ATM transactions $1,350,000200,00050,000$

Required:

$1)$ Determine the overall average cost of servicing a checking account customer at Pitt.

$2)$ Determine the average cost per customer type, using activity based costing techniques.

$3)$ Describe ways in which banks could price discriminate among customer types. Make sure you consider potential customer reactions in your recommendations