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Hometown Bank is determining the price for its newest mini debit card. The card can be used at any retail outlet with a swipe reader. No PIN number or signature is required. Sigrid Olmo has developed the following annual info for use in upcoming price determination meetings:
Variable processing costs $50 million
Fixed processing costs $36 million
Selling expenses (fixed) $10 million
General and administrative expenses (fixes) 4 million
Desired profit 3 Billion
Cost of assets employed 10 Billion

Annual usage is expected to be 10 billion in transactions. On average, the company now earns a 6 percent return on assets.
1. Compare the projected cost of one transaction.
2. Using gross margin pricing, compute the price to charge per transaction.
3. Using return on assets pricing, compute the price to charge per transaction.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9411009

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