Rock Solid Bank and Trust (RSB&T) offers only checking accounts.
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 bankâs annual operating costs into four activities:
Data on two representative customers follow:
a. Compute RSB&Tâs 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 (= $7,500,000/$187,500,000) 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 costinganalysis.
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