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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 6.10 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 Driver volume $ 2,850, eee 3,800,000 uses 1,710, eee 285,000 visits 12,540, eee 152,000,000 transactions 11,400, eee $712,500,000 in deposits $28,500, eee 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 $6,080 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 (= $28,500,000/$712,500,000) 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
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