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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
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 5.70 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 ATH Visiting branch Processing transaction Managing functions Total overhead Coat Driver Number of uses Cost $ 2,250,000 Driver Volume 3,000,000 uses Number of visits. 1,350,000 225,000 visits Number of transactions Total deposits 9,900,000 120,000,000 transactions 9,000,000 $562,500,000 in deposits $22,500,000 Data on two representative customers follow. Customer A Customer B ATM uses 100 200 Branch visits 5 Number of transactions 40 Average deposit $6,000 201 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 ($22,500,000/$562,500,000) 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 costing analysis. Complete this question by entering your answers in the tabs below.
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