Question: A) Compute the single indirect cost allocation rate that the bank would use to allocate the total indirect costs presented in Exhibit B. B) Use

A) Compute the single indirect cost allocation rate that the bank would use to allocate the total indirect costs presented in Exhibit B. B) Use your answer to part A to determine the total annual indirect cost assigned to: (i) the retail customer line, and (ii) the business customer line. What drives these allocations? C) What proportion of the total indirect cost is assigned to: (i) the retail customer line, and (ii) the business customer line? Why? That is, what is the underlying rationale for indirect cost allocation under the old system? What assumption must hold approximately true for the original cost allocation procedure to generate "accurate" customer cost information? D) Use your answer to part B and data on the number of retail and business accounts to determine: (i) the indirect cost per retail account, and (ii) the indirect cost per business account. E) Assuming there are no direct costs or other indirect costs, compute the average contribution to profit per account for retail customers and for business customers. What business strategy would a manger using the original cost allocation system likely adopt? Why

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