Dwayne had a balance of $95.13 in his checking account on Monday morning. That day he used his debit card for the following transactions:
Breakfast at the corner bagel shop: $8.53
Gas in the car: $28.60
Cable bill: $65.39
Oil change: $30.64
Dwayne's bank uses a balance system of debiting from highest to lowest. The bank will not return amounts up to a total of $50 in overdrafts, but they do charge a fee for each overdraft. How many overdraft fees will Dwayne incur?
A. 1
B. 2
C. 3
D. 4
Answer (2)
Sort transactions from highest to lowest: Cable bill ($65.39), Oil change ($30.64), Gas ($28.60), Breakfast ($8.53).
Calculate balance after cable bill: $95.13 - $65.39 = $29.74.
Calculate subsequent balances and count overdrafts: Oil change (Overdraft #1), Gas (Overdraft #2), Breakfast (Overdraft #3).
Dwayne incurs 3 overdraft fees: 3 .
Explanation
Sorting Transactions First, we need to determine the order in which the transactions are debited from Dwayne's account. The bank uses a highest-to-lowest debiting system. So, we sort the transactions in descending order:
Cable bill: $65.39 Oil change: $30.64 Gas in the car: $28.60 Breakfast at the corner bagel shop: $8.53
Tracking Balance Next, we will subtract the transactions from the initial balance in the order determined above and keep track of the balance after each transaction. We also need to count the number of times the balance goes below $0, as each instance incurs an overdraft fee.
Initial balance: $95.13
Balance after Cable Bill
After the cable bill ($65.39): 95.13 − 65.39 = 29.74 Balance: $29.74 (No overdraft)
Balance after Oil Change
After the oil change ($30.64): 29.74 − 30.64 = − 0.90 Balance: -$0.90 (Overdraft fee #1)
Balance after Gas
After gas ($28.60): − 0.90 − 28.60 = − 29.50 Balance: -$29.50 (Overdraft fee #2)
Balance after Breakfast
After breakfast ($8.53): − 29.50 − 8.53 = − 38.03 Balance: -$38.03 (Overdraft fee #3)
Counting Overdraft Fees Dwayne incurs an overdraft fee each time his account balance goes below $0. From the calculations above, this happens three times. Therefore, Dwayne will incur 3 overdraft fees.
Final Answer The number of overdraft fees Dwayne will incur is 3.
Examples
Understanding how banks debit transactions and charge overdraft fees can help you manage your finances effectively. For example, if you know your bank debits from highest to lowest, you can prioritize which bills to pay first to avoid overdraft fees. This is similar to optimizing resource allocation in project management, where you prioritize tasks based on their impact and urgency to maximize efficiency and minimize potential losses.
Dwayne will incur 3 overdraft fees based on his transactions. This is determined by calculating his balance after each transaction in the order that they are debited, which results in three instances where his balance fell below zero. Thus, the answer is 3 overdraft fees.
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