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 >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Need Assistance with A, B and C
Transcribed Image Text: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.
Cost Driver
Activity
Using ATM
Visiting branch
Processing transaction
Managing functions
Total overhead
Driver Volume
3,800,000 uses
285,000 visits
152,000,000 transactions
Cost
$ 2,850,000
1,710,000
12,540,000
Number of uses
Number of visits
Number of transactions
Total deposits
11,400,000 $712,500,000 in deposits
$28, 500,000
Data on two representative customers follow.
Customer A
Customer B
ATM uses
Branch visits
100
200
20
Number of transactions
1,500
$6,000
40
Average deposit
$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 >
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