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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
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 7.20 percent annually on its investments of those deposits. To compete with larger banks, RSB&T pays depositors 0.50 percent on all deposits. A recent study classified the bank's annual operating costs into four activities. Activity Using ATM Visiting branch Processing transaction Managing functions Total overhead Cost Driver Number of uses Number of visits Number of transactions Total deposits Cost $ 4,500,000 2,700,000 19,800,000 18,000,000 $45,000,000 Driver Volume 6,000,000 uses 450,000 visits 240,000,000 transactions $1,125,000,000 in deposits Data on two representative customers follow. ATM uses Branch visits Number of transactions Average deposit Customer A 100 5 40 $6,000 Customer B 200 20 1,500 $6,000 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 = 0.50 percent of deposits, operating costs are 4 percent = $45,000,000/$1,125,000,000) 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 costing analysis. Complete this question by entering your answers in the tabs below. Required A Required B Required Compute RSB&T's operating profits. Operating profit
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