Financial Risk Manager Part 2
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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:
- 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?
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?
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