Question
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 5.50 percent annually on its investments of those deposits. To compete with larger banks, RSB&T pays depositors 0.40 percent on all deposits. A recent study classified the banks annual operating costs into four activities: Activity Cost Driver Cost Driver Volume Using ATM Number of uses $ 1,365,000 2,100,000 uses Visiting branch Number of visits 1,336,000 167,000 visits Processing transaction Number of transactions 6,966,000 81,000,000 transactions Managing functions Total deposits 7,360,000 $ 460,000,000 in deposits Total overhead $ 17,027,000 Data on two representative customers follow: Customer A Customer B ATM uses 250 300 Branch visits 5 25 Number of transactions 50 2,300 Average deposit $ 7,700 $ 7,700 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 = 0.40 percent of deposits; operating costs are 4 percent of deposits. (Do not round intermediate calculations. Round your answers to 2 decimal places.) 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. (Do not round intermediate calculations. Round your answers to 2 decimal places. Loss amounts should be indicated by a minus sign.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started