Exercise 10-32 (Algo) Activity-Based Costing of Customers (LO 10-3, 4)Northwestern Bank (NB) offers only checking accounts. Customers can write checks and use a network of automated teller machines.NB earns revenue by investing the money deposited; currently, it averages 4.1 percent annually on its investments of those deposits.To compete with larger banks, NB pays depositors 0.3 percent on all deposits. A recent study classified the bank's annual operatingcosts into four activities.ActivityUsing ATMVisiting branchProcessing transactionsManaging functionsTotal overheadCost DriverNumber of usesNumber of visitsNumber of transactionsTotal depositsCost$ 1,936,8001,900,8008,521,9207,321,600$ 19,681,120Driver Volume3,228,000 uses396,000 visits129,120,000 transactions$ 615,035,000 in depositsData on two representative customers follow:EmilyJacobATM uses40130Branch visits5Number of transactionsAverage deposit20045520$ 10,000$ 10,000 Required:a. Compute the operating profit for Northwestern Bank.b. Compute the profit from Emily and Jacob, assuming that customer costs are based only on deposits. Interest costs = 0.3 percent ofdeposits; operating costs are 3.2 percent (= $19,681,120/$615,035,000) of deposits.c. Compute the profit from Emily and Jacob, assuming that customer costs are computed using the information in the activity-basedcosting analysis.Complete this question by entering your answers in the tabs below.Required ARequired BRequired CCompute the operating profit for Northwestern Bank.Operating profitRequiredRequired B >

Under activity-based costing method, the cost is allocated to each activity based on its…

Required: a. Compute the operating profit for Northwestern Bank. b. Compute the profit from Emily and Jacob, assuming that customer costs are based only on deposits. Interest costs = 0.3 percent of deposits; operating costs are 3.2 percent (= $19,681,120/$615,035,000) of deposits. c. Compute the profit from Emily and Jacob, 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 the operating profit for Northwestern Bank. Operating profit < Required A Required B >

Required: a. Compute the operating profit for Northwestern Bank. b. Compute the profit from Emily and Jacob, assuming that customer costs are based only on deposits. Interest costs = 0.3 percent of deposits; operating costs are 3.2 percent (= $19,681,120/$615,035,000) of deposits. c. Compute the profit from Emily and Jacob, 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 the operating profit for Northwestern Bank. Operating profit < Required A Required B >

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter6: Cash And Receivables

Section: Chapter Questions

Problem 12C: Researching GAAP Situation Hamilton Company operates in an industry with numerous competitors. It is...

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Bird's Eye Treehouses, Incorporated, a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. Therefore, it is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by 1.5 days. Average number of payments per day Average value of payment Variable lockbox fee (per transaction) Effective annual rate on money market securities 825 $745 $.15 a. NPV b. NPV 5.5% The total collection time will be reduced by three days if the lockbox system is adopted. a. What is the NPV of the new lockbox system? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose in addition to the variable charge, there is an annual fixed charge of $5,000 to be paid at the end of each year. What is the NPV now? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer…
Bird's Eye Treehouses, Incorporated, a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by 1.5 days. Assume 365 days a year. Average number of payments per day Average value of payment Variable lockbox fee (per transaction) Annual interest rate on money market securities 880 $830 $.10 3.2% a. What is the NPV of the new lockbox system? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose in addition to the variable charge that there is an annual fixed charge of $3,000 to be paid at the end of each year. What is the NPV now? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely…
Bird's Eye Treehouses, Incorporated, a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by 1.5 days. Assume 365 days a year. Average number of payments per day Average value of payment Variable lockbox fee (per transaction) Annual interest rate on money market securities 850 $ 800 $.10 a. NPV b. NPV 3.2% a. What is the NPV of the new lockbox system? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose in addition to the variable charge that there is an annual fixed charge of $3,000 to be paid at the end of each year. What is the NPV now? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
TB MC Qu. 9-77 (Algo) Banc Corp. Trust is considering either a bankwide... Banc Corp. Trust is considering either a bankwide overhead rate or department overhead rates to allocate $368,000 of indirect costs. The bankwide rate could be based on either direct labor hours (DLH) or the number of loans processed. The departmental rates would be based on direct labor hours for Consumer Loans and a dual rate based on direct labor hours and the number of loans processed for Commercial Loans. The following information was gathered for the upcoming period: Department DLH Loans Processed Direct Costs Consumer 15,000 850 $ 260,000 Commercial 8,000 150 $ 140,000 If Banc Corp. Trust uses a bankwide rate based on direct labor hours, what would be the indirect costs allocated to the Commercial Department? Multiple Choice $128,000. $125,600. $130,400. $140,000.
Bird's Eye Treehouses Inc. has determined that a majority of its customers are located in the Winnipeg area. It therefore is considering using a lockbox system offered by a bank in Manitoba. The bank has estimated that use of the system will reduc collection time by 1.5 days. Average number of payments per day 760 Average value of payment $ 770 Variable lockbox fee (per transaction) $ 0.10 Annual interest rate on money market securities 4.0% e-1. What is the NPV of the new lockbox system? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit "$" sign in your response.) NPV $170558.7 a-2. Should the lockbox project be accepted? 13 Yes No b-1. If there were a fixed charge of $7,000 per year in addition to the variable charge, what is the NPV of the new lockbox system? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit "$" sign in your response.) NPV $ b-2.…
A bank has estimated its expected (predicted) loan loss rate on its consumer loans at 3.25%. If the bank wishes to earn 8% on it consumer loans, what rate should it charge its customers? 11.34% 11.63% 4.60% 4.35% The following is not an example of a closed-end loan Automobile Loans Home mortgages Recreational vehicle loan Credit Card Core deposits of a commercial bank consist of the following except: Demand deposits Savings deposits Money market deposits Eurodollar deposits
a. Paradise Retailers, Inc. (PRI) determined that $1,500,000 is needed for cash transactions made during the next year. Each time PRI deposits money in its checking account, a charge of $12.95 is assessed to cover clerical costs. PRI can hold marketable securities that yield 4.5%, and then convert these securities to cash at a cost of only the $12.95 deposit charge. Optimal Cash Amount = 29382.53 PRI’s financial managers have not been following the Baumol Model. Instead, they have been transferring cash from marketable securities less frequently, namely, transferring cash every three weeks. What total cash cost including holding costs and transactions costs could PRI save by transferring the optimal cash amount C* rather than this larger transfer amount?
Example One of the companies adopts a central system for the payment of payment bills through the general administration, and this requires an average of 4 days for the checks to reach the customers as well as 1,5 The day of registration of checks before they are deposited in the bank, and the average company receipts are 500 thousand dinars per day. The company is studying the possibility of using mailboxes through renting, and this will reduce the time for mailing checks by an amount 2,5 day, and the time required to prepare checks for deposit is reduced by one day. Required: 1. What is the amount of cash that can be released in this process? 2. Determine the alternative cost of the released funds if the return on financial instruments Short term 5%? 3. Is it feasible to use this system when considering the alternative cost? For the liberated money, if the costs of the local mailbox system are 75,000 dinars annually?
7. The money creation process Suppose Southeast Mutual Bank, Walls Fergo Bank, and PJMorton Bank all have zero excess reserves. The required reserve ratio is presently set at 25%. Tim, a Southeast Mutual Bank customer, deposits $1,800,000 into his checking account at the local branch. Complete the following table to reflect any changes in Southeast Mutual Bank's T-account (before the bank makes any new loans). Assets Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 25%. Hint: If the change is negative, be sure to enter the value as negative number. Amount Deposited Change in Excess Reserves (Dollars) (Dollars) 1,800,000 Liabilities Change in Required Reserves (Dollars) Now, suppose Southeast Mutual Bank loans out all of its new excess reserves to Rosa, who immediately uses the funds to write a check to Nick. Nick deposits the funds immediately into his checking account at Walls Fergo Bank. Then Walls…
PLEASE MAKE IT IN EXCEL AND SHOW THE FORMULAS (Take screenshots) La Resolana, S.A., has credit sales of $180,000 per year, with net payment terms of 30 days, which is also the average collection period. La Resolana does not currently offer any cash discounts, so customers take the 30 days to pay. What is the average accounts receivable balance? What is the accounts receivable turnover?
4 Whitmer Inc. sells to customers all over the U.S., and all receipts come in to its headquarters in New York City. The firm's average accounts receivable balance is $2.5 million, and they are financed by a bank loan at an 11% annual interest rate. The firm is considering setting up a regional lockbox system to speed up collections, and it believes this would reduce receivables by 20%. If the annual cost of the system is $15,000, what pre-tax net annual savings would be realized? (Hint: Lockbox will reduce annual average balanc of account receivable which in turn save annual interest costs. Compare this savings with the annual lockbox cost)
s Problem 7-1 (Algo) Cost-benefit analysis of cash management [LO7-2] City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers, so the firm's checks will take longer to clear the bank. Collection time has been reduced by three days and disbursement time increased by two days because of these policies. Excess funds are being invested in short-term instruments yielding 4 percent per annum. a. If City Farm has $4.45 million per day in collections and $3.80 million per day in disbursements, how many dollars has the cash management system freed up? Note: Enter your answer in dollars not in millions (e.g., $1,234,567). Freed-up funds b. How much can City Farm earn in dollars per year on short-term investments made possible by the freed-up cash? Note: Enter your answer in dollars not in millions (e.g., $1,234,567). Interest on freed-up cash