Sallisaw Savings & Loan
Sallisaw Savings & Loan Has Requested

Sallisaw Savings & Loan
Sallisaw Savings & Loan has requested an analysis of checking account profitability by customer type. Customers are categorized according to size of their account: low balances, medium balances, and high balances. The activities associated with the three different customer categories and their associated annual costs are as follows: $\begin{array}{ll}\text { Opening and closing accounts } & \$ 100,000 \\\text { Issuing monthly statements } & \$ 150,000 \\\text { Frocessing transactions } & \$ 1,025,000 \\\text { Customer inquiries } & \$ 200,000 \\\text { Froviding ATM services } & \$ 560,000\\\text {Total Costs}&\$2,035,000\end{array}$ Additional data concerning the usage of the activities by the various customers are also provided: $$\begin{array} { l r r r } & \underline { \text { Low } } & \underline { \text { Medium } } & \underline { \text { High } } \\\text { Number of accounts } & 7,500 & 1,500 & 1,000 \\\text { opened/olosed } & & \\ \text { Number of }& 225,000 & 50,000 & 25,000 \\\text { Sutements issued } \\\text { Processing } \\\text { transactions }& 9,000,000 & 1,000,000 & 250,000\\\text { Number of } \\\text { telephone minutes } & 500,000 & 300,000 & 200,000 \\\text { Number of ATM } \\\text { transactions }& 675,000 & 100,000 & 25,000 \\ \text { Number of checking } \\\text { accolnts }& 19,000 & 4,000 & 2,000\end{array}$$ The company uses an activity-based costing system. The activity rate for opening and closing statements is based on the number of accounts opened and closed. The activity rate for issuing monthly statements is based on the number os statements issued. The activity rate for processing transactins is based on the number of transactions processed. The activity rate for customer inquiries is based on the number of telephone minutes. The rate for ATM services is based on the number of ATM transactions.
-Refer to Sallisaw Savings & Loan. Using activity-based costing, what is the activity rate for providing ATM services?

A) $0.20 per transaction
B) $0.55 per transaction
C) $0.70 per transaction
D) $5.60 per transaction

Correct Answer:

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