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Exercise 14 The Lusitano Bank wants to create a profitability analysis of the Premium accounts of its clients. The bank gets a 2% spread (i.e.,

Exercise 14

The Lusitano Bankwants to create a profitability analysis of the Premium accounts of its clients.

The bank gets a 2% spread (i.e., the difference between the rate charged on loans (6%) and the rate paid to savers (4%) on their average balance deposited in the bank).

The Premium account allows the free use of unlimited services, expressed in the frame below.

Only the clients who have less that 1.000 as average balance in their account in the bank, have to pay 15 monthly.

To calculate the cost of the services provided to clients, the bank implemented activity-based costing.

Concerning the information of last year, we have the following data:

Unit cost driver Clients
Almeida Barbosa Cardoso

Deposits made at the bank agency

Deposits made at the machines

Bank checks

Withdrawals in foreign currency

Information about the balance of account

Average balance in the Premium account

1,80

0,60

6,00

9,00

0,75

40

10

12

6

12

1.200

30

20

4

1

24

800

5

30

2

14

8

25.000

The clients Almeida and Cardoso had always an average balance above 1.000 in their Premium account. However, Barbosa had an average balance of less than 1.000 in his account in ten months of the year.

Assignment:

The return (profit) for the bank on the Premium accounts of each client. Comment your results

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