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)
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 |
$ 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.
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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.
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