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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 6.60 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 Cost Driver Cost 1,520,000 1,900,000 uses Driver Volume Number of uses Number of visits Number of transactions Total deposits 990,000 7,505,000 6,750,000 165,000 visits 79,000,000 transactions $450,000,000 in deposits Total overhead $ 16,765,000 Data on two representative customers follow: Customer A Customer B 230 ATM uses Branch visits Number of transactions Average deposit 280 23 2,200 $7,500 50 $7,500 Required a. Compute RSB&Ts 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 5 percent of deposits. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Profit Per Customer Customer A Customer B 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.)
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