Prepare a management report for the CEO $($see below formatting criteria and refer to lecture from January

$16)$ and include answers the following questions:

$1.$ Compute the profit $($or loss$)$ per account for $($a$)$ the retail customer line and $($b$)$ the business

customer line, under both the $($i$)$ original cost system and $($ii$)$ the new activity$-$based costing $($ABC$)$

system.

$2.$ What are the signs that Detroit$$s original cost system is $$broken$,$ such that it needs refinement or

improvement?

$3.$ Recall Detroit National Bank$$s incentive plan that relies on bonuses to boost customer numbers.

What are your thoughts on this strategy, is it advisable? What adjustments might you consider as a

result of your ABC analysis?

$4.$ Activity based management involves managers utilizing ABC data for business decision$-$making.

How could Detroit's managers leverage ABC data to formulate more lucrative marketing strategies?

In what ways can they employ ABC information to pinpoint opportunities for cost reduction while

maintaining customer satisfaction?

$5.$ Explain to Rachel, why she needs to understand the costing system in place, and why the benefits

of ABC are going to outweigh the costs of implementing ABC at Detroit National Bank.

Remember that this report is going to the CEO of Detroit National Bank. They have a basic understanding

of what is going on at the company. Do not reference the questions that are posed but weave them into

your report.

Format:

Ensure that the document you submit is professional in nature. Feel free to use Word, Excel or other

programs but please only submit one cohesive Word or PDF document. Good format is required for any

financial statements $($titles and appropriate columns$/$rows$).$ I will be looking for correct spelling, grammar,

and formatting in your submission. $[$Scored based on rubric below $10$ marks$]$

Criterion Poor $(06)$ Acceptable $(78)$ Excellent $(910)$

Professionalism and

accuracy of grammar,

spelling, writing style

and formatting

Numerous errors,

unprofessional

formatting, confusing and

unstructured content

More than one document

submitted, difficult to

follow and understand

Few errors, direct and

concise writing style.

Questionable choices for

text and data formatting

$($e$.$g$.$ overuse or misuse of

bullets, no visual data$)$

Document not easy to

follow and$/$or understand

No errors, direct and

concise writing style

Professionally formatting

with text and visual data.

One document submitted,

that is cohesive and

understandable.

By completing this assignment and submitting through Blackboard, it is assumed that you have signed the

following:

I pledge on my honor that I have not given or received any unauthorized assistance on this assignment.

Unauthorized assistance on this assignment is information outside of your textbook and notes from this

course.

Do not share$/$copy$/$post this case study anywhere $$ it is for use in this class only.

Detroit National Bank

Detroit National Bank began operations in the mid$-1980$s$.$ The bank quickly grew by

providing checking account services to many small businesses that preferred to do business with

a "local" bank. Although Detroit initially offered checking account services for individual

accounts $($retail customers$),$ the bank primarily focused on serving its business customers. During

the economic slowdown of the early $1990$s that weakened the local economy, growth in business

customer accounts began to decline. In response. Detroit's senior management adopted a new

strategy, focusing on increasing the number of retail customer accounts. By aggressively

marketing individual retail accounts. Detroit continued to grow. Today, the Detroit National

Bank strives to maintain a stable base of business customers, while actively competing for an

increased market share of retail customers.

Recent income statements $($Exhibit A$)$ reveal a decline in the bank's profits. The bank's

primary $($noninterest$)$ expense consists of salaries and employee benefits. Most full$-$time

employees' first priority is providing services to customers; these employees conduct their

administrative responsibilities during slack times. The Bank schedules additional part$-$time

employees to work during peak demand times, from $11$ AM$-2$ PM and Friday afternoons.

Flexibility in scheduling part$-$time employees means that the bank's staff is lean and fully

utilized. Detroit's CEO, Rachel Greene, believes that this staffing arrangement allows the bank to

provide speedy customer service, while operating at practical capacity. $($That is$,$ the bank's staff

is fully utilized in efficient operations, after allowing for bank holidays and other scheduled staff

activities such as training.$)$

To counter falling profits. Detroit's directors took two actions last year, both aimed at

increasing the bank's retail customer base. First, Detroit established a service call center to

respond to customer inquiries about account balances, checks cleared, fees charged, and other