Could you help me to solve these requirements form 1-3. Please give me the corre

Question

Could you help me to solve these requirements form 1-3. Please give me the correct answer. Thank you.

The cost of the paperless billing system would be $215,640 per quarter with no variable costs since the costs of the system are the salaries of the clerks and the Planet Entertainment is a provider of cable, Internet, and on-demand video services. Planet currently sends monthly bills to its customers via the postal service. Because of a concern for the environment and recent increases in postal cost of leasing the computer system. The paperless billing system being proposed rates, Planet management is considering offering an option to its customers for ould be able to handle up to 1,010,000 bills per quarter (more than 1,010,000 paperless billing. In addition to saving printing, paper, and postal costs, paperless bills per quarter would require a different computer system and is outside the billing will save energy and water (through reduced paper needs, reduced waste scope of the current situation at Planet.) The company has gathered its cost data disposal, and reduced transportation needs.) Although Planet would like to switch for the past year by quarter for paper, toner cartridges, printer maintenance costs to 100% paperless billing, many of its customers are not comfortable with paperless billing or may not have online access, so the paper billing option will Click the icon to view the data. remain regardless of whether Planet adopts a paperless billing system or not. and postage costs for its billing department. The cost data are as follows Read the requirements Requirement 1. Calculate the variable cost per bill mailed under the current paper-based billing system The variable cost per bill mailed under the current paper-based billing system is $

Explanation / Answer

Solution

Sustainability and cost behaviour

1) Variable cost per bill mailed

Highest Cost quarter = Quarter 3

Lowest cost quarter = Quarter 1

Variable cost per bill mailed = ($820000 - $723200)/(760000 - 650000)

Variable cost per bill mailed = ($96800)/(110000) = $0.88

2) Calculation of savings

Next quarter bill estimation = 760000

Conversion to paperless system = 760000*40% = 304000

Savings if paperless system adopted = (304000*$0.88) = $267520

Total cost of Paperless system = $215640

Net Savings = ($267520 - $215640) = $51880

3) Savings calculation

Conversion = 30% = 228000 to paperless

Cost saving = (228000*$0.88) = $200640

Cost of paperless system = $215640

Loss = ($215640 - $200640) = ($15000)

Company should still adopt paperless billing system since in future it will generate savings since more people will convert to paperless mode because of ease of technology.

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