AICPA Exam CPA-Business Topic 1 Question 35 Discussion

Kemple Cleaning Services is a newly established janitorial firm, and the owner is deciding which type of checking account to open. Kemple is planning to keep a $500 minimum balance in the account for emergencies and plans to write an average of 80 checks per month. The bank charges $10 per month plus a $0.10 per check charge for a standard business checking account with no minimum balance.

Kemple also has the option of a premium business checking account, which requires a $2,500 minimum balance but has no monthly fees or per check charges. If Kemple's cost of funds is 10 percent, which account should Kemple choose?