Figure 7-8. Sallisaw Savings & Loan Has Requested an Analysis of Checking

question 32

Essay

Figure 7-8.
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:
Additional data concerning the usage of the activities by the various customers are also provided:
Refer to Figure 7-8.Sallisaw 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 of statements issued.The activity rate for processing transactions 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.

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Definitions:

Owns the Asset

Refers to having legal title or right to possession of an asset, implying control over its use and the benefits it produces.

Lessee

The party in a lease agreement who pays the lessor for the use of an asset.

Lessor

The party in a lease agreement who owns the leased asset and grants the lessee the right to use that asset in exchange for periodic lease payments.

Deductibility

The ability of an expense or contribution to be subtracted from gross income, reducing the taxable income and tax liability.