Explanation:
To find the monthly fee the bank should charge to cover all expenses and achieve its desired profit margin, we need to sum up all the given monthly per-account costs and add the targeted profit.
Total Servicing Costs = $5.00
Overhead Expenses = $3.00
Targeted Profit Margin = $0.40
Total required revenue per account = Servicing Costs + Overhead + Profit Margin
Total = $5.00 + $3.00 + $0.40 = $8.40.
Without any implied interest income generated from the $500 minimum balance (as no interest rate is provided), the entire cost structure combined with the profit margin dictates a monthly fee of $8.40.
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Q.53 XYZ bank determines that its basic checking account costs the bank $5.00 per month in servicing costs (assume the servicing costs are labor and computer time) and $3.00 per month in overhead expenses. This account requires a $500 minimum balance. Additionally, the bank also tries to build a $0.40 per month profit margin on these accounts. Determine the monthly fee that the bank should charge each customer.
A
$5.00
B
$7.60
C
$8.00
D
$8.40
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