Exercise 10-32 (Algo) Activity-Based Costing of Customers (LO 10-3, 4)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 operatingcosts into four activities.ActivityUsing ATMVisiting branchProcessing transactionsManaging functionsTotal overheadCost DriverNumber of usesNumber of visitsNumber of transactionsTotal depositsCost$ 1,936,8001,900,8008,521,9207,321,600$ 19,681,120Driver Volume3,228,000 uses396,000 visits129,120,000 transactions$ 615,035,000 in depositsData on two representative customers follow:EmilyJacobATM uses40130Branch visits5Number of transactionsAverage deposit20045520$ 10,000$ 10,000 Required:a. Compute the operating profit for Northwestern Bank.b. Compute the profit from Emily and Jacob, assuming that customer costs are based only on deposits. Interest costs = 0.3 percent ofdeposits; operating costs are 3.2 percent (= $19,681,120/$615,035,000) of deposits.c. Compute the profit from Emily and Jacob, assuming that customer costs are computed using the information in the activity-basedcosting analysis.Complete this question by entering your answers in the tabs below.Required ARequired BRequired CCompute the operating profit for Northwestern Bank.Operating profitRequiredRequired B >

Under activity-based costing method, the cost is allocated to each activity based on its…

Required: a. Compute the operating profit for Northwestern Bank. b. 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 (= $19,681,120/$615,035,000) of deposits. c. Compute the profit from Emily and Jacob, 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 the operating profit for Northwestern Bank. Operating profit < Required A Required B >

Required: a. Compute the operating profit for Northwestern Bank. b. 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 (= $19,681,120/$615,035,000) of deposits. c. Compute the profit from Emily and Jacob, 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 the operating profit for Northwestern Bank. Operating profit < Required A Required B >

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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