Rock Solid Bank and Trust (RSB&T) offers only checkingaccounts. Customers can write checks and use a network of automatedteller machines. RSB&T earns revenue by investing the moneydeposited; currently, it averages 7.00 percent annually on itsinvestments of those deposits. To compete with larger banks,RSB&T pays depositors 0.60 percent on all deposits. A recentstudy classified the bank’s annual operating costs into fouractivities:
Activity
CostDriver
Cost
Driver Volume
Using ATM
Number ofuses
$
2,400,000
3,000,000
uses
Visitingbranch
Number ofvisits
800,000
160,000
visits
Processingtransaction
Number oftransactions
8,100,000
90,000,000
transactions
Managingfunctions
Totaldeposits
7,650,000
$
425,000,000
in deposits
Totaloverhead
$
18,950,000
Data on two representative customers follow:
Customer A
Customer B
ATM uses
290
340
Branchvisits
5
18
Number oftransactions
45
1,950
Averagedeposit
$
7,000
$
7,000
Required:
a. Compute RSB&T’s operating profits.
OPERATING PROFITS:__________
b. Compute the profit from Customer A andCustomer B, assuming that customer costs are based only ondeposits. Interest costs = 0.60 percent of deposits; operatingcosts are 6 percent of deposits. (Do not round intermediatecalculations. Round your answers to 2 decimal places.)
CUSTOMER A PROFIT:______CUSTOMER B PROFIT:_______
c. Compute the profit from Customer A andCustomer B, assuming that customer costs are computed using theinformation in the activity-based costing analysis. (Do notround intermediate calculations. Round your answers to 2 decimalplaces. Loss amounts should be indicated by aminus sign.)
SALES REVENUE CUSTOMERS A,B: _____,_____
INTEREST ON DEPOSIT CUSTOMERSA,B:______,_____
TOTAL OPERATING COST CUSTOMERSA,B:_____,______
CUSTOMER PROFIT/LOSS CUSTOMERSA,B:______,______
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