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 Cost Driver Cost Driver Volume Number of uses S 2,850,000 3,800, 000 uses 285,000 visits 152,000, 000 transactions Number of visits 1,710,000 12,540, 000 Number of transactions Total deposits 11,400,000 $712,500,000 in deposits Total overhead $28, 500, 000 Data on two representative customers follow. Customer A Customer B ATM uses 100 Branch visits Number of transactions Average deposit 200 20 1,500 $6,000 40 $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 (= $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. Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute RSB&T's operating profits. Operating profit < Required A Required B >
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 Cost Driver Cost Driver Volume Number of uses S 2,850,000 3,800, 000 uses 285,000 visits 152,000, 000 transactions Number of visits 1,710,000 12,540, 000 Number of transactions Total deposits 11,400,000 $712,500,000 in deposits Total overhead $28, 500, 000 Data on two representative customers follow. Customer A Customer B ATM uses 100 Branch visits Number of transactions Average deposit 200 20 1,500 $6,000 40 $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 (= $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. Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute RSB&T's operating profits. Operating profit < Required A Required B >
Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 19P
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