
Ultimate access to all questions.
The treasurer of a regional bank is concerned that the bank may not be properly compensated for the services it provides to its depositors and asks a manager to assess a price for these services. The manager applies cost-plus pricing for all depository services and uses the following data for pricing the automated teller machine (ATM) service:
Operating expense per ATM visit: USD 0.25
Estimated overhead cost allocated per ATM visit: USD 0.35
Profit required per ATM visit: USD 0.05
The bank's target return on capital: 15%
What is the correct amount for the bank to charge per ATM visit according to the cost-plus pricing model?
A
USD 0.30
B
USD 0.65
C
USD 0.70
D
USD 0.74