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Answer: USD 0.65
## Explanation **Correct Answer: B (USD 0.65)** In cost-plus pricing, the price is calculated as: **Price = Operating Expense + Overhead Cost + Required Profit** Using the given data: - 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 **Calculation:** 0.25 + 0.35 + 0.05 = USD 0.65 **Why other options are incorrect:** - **A (USD 0.30)**: Only includes operating expense (0.25) and profit (0.05), but neglects the overhead cost (0.35) - **C (USD 0.70)**: Incorrectly adds an additional return on capital fee to the overhead cost (0.15 × 0.35 = 0.0525), which is already captured in the required profit - **D (USD 0.74)**: Incorrectly adds an additional return on capital fee to both operating expense and overhead cost (0.15 × (0.25 + 0.35) = 0.09), which is already captured in the required profit The target return on capital (15%) is already incorporated into the required profit per ATM visit (USD 0.05), so it should not be added again to the calculation.
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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:
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