Northwestern Bank (NB) offers only checking accounts. Customers can write checks and use a network of automated teller machines. NB earns revenue by investing the money deposited; currently, it averages 4.1 percent annually on its investments of those deposits. To compete with larger banks, NB pays depositors 0.3 percent on all deposits. A recent study classified the bank’s annual operating costs into four activities. Activity Cost Driver Cost Driver Volume Using ATM Number of uses $ 1,893,600 3,156,000 uses Visiting branch Number of visits 1,641,600 342,000 visits Processing transactions Number of transactions 8,331,840 126,240,000 transactions Managing functions Total deposits 7,283,200 $ 598,445,000 in deposits Total overhead   $ 19,150,240     Data on two representative customers follow:   Emily Jacob ATM uses 40 130 Branch visits 5 45 Number of transactions 200 520 Average deposit $ 10,000 $ 10,000 Required: Compute the operating profit for Northwestern Bank. Compute the profit from Emily and Jacob, assuming that customer costs are based only on deposits. Interest costs = 0.3 percent of deposits; operating costs are 3.2 percent (= $19,150,240/$598,445,000) of deposits. Compute the profit from Emily and Jacob, assuming that customer costs are computed using the information in the activity-based costing analysis.   Compute the operating profit for Northwestern Bank.         Operating profit         profit per customer emily   jacob     Required C Compute the profit from Emily and Jacob, assuming that customer costs are computed using the information in the activity-based costing analysis. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Loss amounts should be indicated by a minus sign. Show less           Emily Jacob Sales revenue     Interest on deposit     Total operating cost     Customer profit or (loss)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Northwestern Bank (NB) offers only checking accounts. Customers can write checks and use a network of automated teller machines. NB earns revenue by investing the money deposited; currently, it averages 4.1 percent annually on its investments of those deposits. To compete with larger banks, NB pays depositors 0.3 percent on all deposits. A recent study classified the bank’s annual operating costs into four activities.

Activity Cost Driver Cost Driver Volume
Using ATM Number of uses $ 1,893,600 3,156,000 uses
Visiting branch Number of visits 1,641,600 342,000 visits
Processing transactions Number of transactions 8,331,840 126,240,000 transactions
Managing functions Total deposits 7,283,200 $ 598,445,000 in deposits
Total overhead   $ 19,150,240    

Data on two representative customers follow:

  Emily Jacob
ATM uses 40 130
Branch visits 5 45
Number of transactions 200 520
Average deposit $ 10,000 $ 10,000

Required:

  1. Compute the operating profit for Northwestern Bank.
  2. Compute the profit from Emily and Jacob, assuming that customer costs are based only on deposits. Interest costs = 0.3 percent of deposits; operating costs are 3.2 percent (= $19,150,240/$598,445,000) of deposits.
  3. Compute the profit from Emily and Jacob, assuming that customer costs are computed using the information in the activity-based costing analysis.

 

Compute the operating profit for Northwestern Bank.

 
 
 
 
Operating profit  

 

 

  profit per customer
emily  
jacob  

 

  • Required C

Compute the profit from Emily and Jacob, assuming that customer costs are computed using the information in the activity-based costing analysis.

Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Loss amounts should be indicated by a minus sign.

Show less
 
 
 
 
  Emily Jacob
Sales revenue    
Interest on deposit    
Total operating cost    
Customer profit or (loss)  

 

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