Cornerstones of Managerial Accounting 6th Edition by Maryanne Mowen,Don Hansen ,Dan Heitger

Exercise 52

Differential Costing
As pointed out earlier in ''Here's the Real Kicker,'' Kicker changed banks a couple of years ago because the loan officer at its bank moved out of state. Kicker saw that as an opportunity to take bids for its banking business and to fine-tune the banking services it was using. This problem uses that situation as the underlying scenario but uses three banks: FirstBank, Community Bank, and RegionalOne Bank. A set of representative data was presented to each bank for the purpose of preparing a bid. The data are as follows:
Checking accounts needed: 6
Checks per month:* 2,000
Foreign debits/credits on checking accounts per month: 200
Deposits per month:* 300
Returned checks:* 25 per month
Credit card charges per month: 4,000
Wire transfers per month: 100, of which 60 are to foreign bank accounts
Monthly credit needs (line of credit availability and cost): $100,000 average monthly usage
*These are overall totals for the six accounts during a month.
Internet banking services?
Knowledgeable loan officer?
Responsiveness of bank?
FirstBank Bid:

Credit card fees: $0.50 per item
Wire transfers: $15 to domestic bank accounts, $50 to foreign bank accounts

The loan officer assigned to the potential Kicker account had 10 years of experience with medium to large business banking and showed an understanding of the audio industry.
Community Bank Bid:

Wire transfers: $30 per wire transfer

Internet banking services? Not currently, but within the next six months
The loan officer assigned to the potential Kicker account had 4 years of experience with medium to large business banking, none of which pertained to the audio industry.
RegionalOne Bank Bid:

Credit card fees: $0.50 per item
Wire transfers: $10 to domestic bank accounts, $55 to foreign bank accounts

The loan officer assigned to the potential Kicker account had 2 years of experience with large business banking. Another branch of the bank had expertise in the audio industry and would be willing to help as needed. This bank was the first one to submit a bid.
Required:
1. Calculate the predicted monthly cost of banking with each bank. Round answers to the nearest dollar.
2. CONCEPTUAL CONNECTION Suppose Kicker felt that full online Internet banking was critical. How would that affect your analysis from Requirement 1? How would you incorporate the subjective factors (e.g., experience, access to expertise)?