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

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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**Rock Solid Bank and Trust (RSB&T) Overview**

Rock Solid Bank and Trust (RSB&T) offers only checking accounts. Customers have the ability to write checks and utilize a network of automated teller machines (ATMs). RSB&T earns revenue by investing the money deposited, averaging a 5.2 percent annual return on these investments. To remain competitive with larger banks, RSB&T pays depositors 0.5 percent on all deposits. A recent study organized the bank's annual operating costs into four main activities, detailed below:

| **Activity**            | **Cost Driver**             | **Cost**     | **Driver Volume**         |
|-------------------------|-----------------------------|--------------|---------------------------|
| Using ATM               | Number of uses              | $1,500,000   | 2,000,000 uses            |
| Visiting branch         | Number of visits            | $900,000     | 150,000 visits            |
| Processing transaction  | Number of transactions      | $6,000,000   | 80,000,000 transactions   |
| Managing functions      | Total deposits              | $6,600,000   | $375,000,000 in deposits  |
| **Total overhead**      |                             | **$15,000,000** |                           |

**Customer Data**

Data on two representative customers is provided below:

|                           | **Customer A**  | **Customer B**  |
|---------------------------|-----------------|-----------------|
| ATM uses                  | 100             | 200             |
| Branch visits             | 5               | 20              |
| Number of transactions    | 40              | 1,500           |
| Average deposit           | $6,000          | $6,000          |

This breakdown provides an insight into the activities that drive costs for RSB&T, with a detailed view of how two specific customers interact with the bank's services, which can help in assessing customer behavior and associated costs.
Transcribed Image Text:**Rock Solid Bank and Trust (RSB&T) Overview** Rock Solid Bank and Trust (RSB&T) offers only checking accounts. Customers have the ability to write checks and utilize a network of automated teller machines (ATMs). RSB&T earns revenue by investing the money deposited, averaging a 5.2 percent annual return on these investments. To remain competitive with larger banks, RSB&T pays depositors 0.5 percent on all deposits. A recent study organized the bank's annual operating costs into four main activities, detailed below: | **Activity** | **Cost Driver** | **Cost** | **Driver Volume** | |-------------------------|-----------------------------|--------------|---------------------------| | Using ATM | Number of uses | $1,500,000 | 2,000,000 uses | | Visiting branch | Number of visits | $900,000 | 150,000 visits | | Processing transaction | Number of transactions | $6,000,000 | 80,000,000 transactions | | Managing functions | Total deposits | $6,600,000 | $375,000,000 in deposits | | **Total overhead** | | **$15,000,000** | | **Customer Data** Data on two representative customers is provided below: | | **Customer A** | **Customer B** | |---------------------------|-----------------|-----------------| | ATM uses | 100 | 200 | | Branch visits | 5 | 20 | | Number of transactions | 40 | 1,500 | | Average deposit | $6,000 | $6,000 | This breakdown provides an insight into the activities that drive costs for RSB&T, with a detailed view of how two specific customers interact with the bank's services, which can help in assessing customer behavior and associated costs.
**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.

---

**Instructions:**

Complete this question by entering your answers in the tabs below.

**Form Fields:**

- **Required A:**
  - Compute RSB&T's operating profits.
  - *Operating profit:* [Input field]

- **Required B:**
  - *Button to navigate to Required B*

- **Required C:**
  - *Button to navigate to Required C*
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. --- **Instructions:** Complete this question by entering your answers in the tabs below. **Form Fields:** - **Required A:** - Compute RSB&T's operating profits. - *Operating profit:* [Input field] - **Required B:** - *Button to navigate to Required B* - **Required C:** - *Button to navigate to Required C*
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