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 5.2 percent annually on its investments of those deposits. To compete with larger banks, RSB&T pays depositors 0.5 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 Total overhead Cost Driver Number of uses Number of visits Number of transactions Total deposits Data on two representative customers follow Cost $ 1,500,000 900,000 6,600,000 6,000,000 $15,000,000 Driver Volume 2,000,000 uses 150,000 visits 80,000,000 transactions $375,000,000 in deposits
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 5.2 percent annually on its investments of those deposits. To compete with larger banks, RSB&T pays depositors 0.5 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 Total overhead Cost Driver Number of uses Number of visits Number of transactions Total deposits Data on two representative customers follow Cost $ 1,500,000 900,000 6,600,000 6,000,000 $15,000,000 Driver Volume 2,000,000 uses 150,000 visits 80,000,000 transactions $375,000,000 in deposits
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 5.2 percent annually on its investments of
those deposits. To compete with larger banks, RSB&T pays depositors 0.5 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
Number of visits
Number of transactions
$ 1,500,000
900,000
6,600,000
6,000,000
$15,000,000
2,000,000 uses
150,000 visits
80,000,000 transactions
$375,000,000 in deposits
Total deposits
Total overhead
Data on two representative customers follow.
ATM uses
Branch visits
Number of transactions
Customer A
100
Customer B
200
20
40
1,500
$6,000
Average deposit
$6,000
Transcribed Image Text: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 = 0.5
percent of deposits; operating costs are 4 percent (= $15,000,000/$375,000,000) 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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