Explanation:
Recall that a bank should price every deposit service high enough to recover all or most of the cost of offering that service, using the following cost-plus pricing formula:
Unit price charged the customer for each deposit service
= (Operating expense per unit of deposit service
In this case,
Unit price charged per month = $5.00 + $3.00 + $0.40 = $8.40
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Q.4083 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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