
Explanation:
The monthly fee must cover all the costs associated with the account plus the bank's desired profit margin.
Total Costs = Servicing costs ($5.00) + Overhead expenses ($3.00) = $8.00
Desired Profit Margin = $0.40
Monthly Fee = Total Costs + Desired Profit = $8.00 + $0.40 = $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