Question

Perkins National Bank has collected the following information for four activities and two types of credit cards:

Activity Driver Classic Gold Activity Rate ($)
Processing transactions Transactions processed 12,000 7,200 0.20
Preparing statements Number of statements 12,000 7,200 0.95
Answering questions Number of calls 24,000 36,000 4.00
Providing ATMs ATM transactions 48,000 14,400 1.50
There are 5,000 holders of Classic cards and 20,600 holders of the Gold cards.
Required:Calculate the unit cost (rounded to the nearest cent) for Classic and Gold credit cards.

Answer 1

Unit cost per classic card = $36.36

Unit cost per classic card = $8.44

Step-by-step explanation:

Total cost for the card = ∑(Transaction × Activity rate)

Thus,

From the value given in the question

Total cost for the classic card

= (12,000 × 0.20) + (12,000 × 0.95) + (24,000 × 4.00) + (48,000 × 1.50)

= 2400 + 11400 + 96000 + 72000

= $181,800

Unit cost per classic card

= [ Total cost for the classic card ] ÷ [ Total number of classic cards ]

= $181,800 ÷ 5,000

= $36.36

Total cost for the gold card

= (7,200 × 0.20) + (7,200 × 0.95) + (36,000 × 4.00) + (14,400 × 1.50)

= 1440 + 6840 + 144000 + 21600

= $173,880

Unit cost per classic card

= [ Total cost for the gold card ] ÷ [ Total number of gold cards ]

= $173,880 ÷ 20,600

= $8.44