Chap 11 Probs 23 & 24 Saved Help Save & Exit Submit Check my work Baird Bank\'s
ID: 2585782 • Letter: C
Question
Chap 11 Probs 23 & 24 Saved Help Save & Exit Submit Check my work Baird Bank's start-up division establishes new branch banks. Each branch opens with three tellers. Total teller cost per branch is $96,000 per year. The three tellers combined can process up to 80,000 customer transactions per year. If a branch does not attain a volume of at least 50,000 transactions during its first year of operations, it is closed. If the demand for services exceeds 80,000 transactions, an additional teller is hired and the branch is transferred from the start-up division to regular operations. 10 points Required a. What is the relevant range of activity for new branch banks? b. Determin the amount of teller cost in total and the average teller cost per transaction for a branch that processes 50,000 eBoak References 60,000, 70,000, or 80,000 transactions. In this case (the activity base is the number of transactions for a specific branch), is the teller cost a fxed or a variable cost? c. Determine the amount of teller cost in total and the average teller cost per branch for Baird Bank, assuming that the start-up division operates 15, 20, 25 or 30 branches. In this case (the activity base is the number of branches), is the teller cost a fixed or a variable cost? Complete this question by entering your answers in the tabs below Required A Required B Required c What is the relevant range of activity for new branch banks? (Enter the lower end of the relevant range first.) e relevant range isExplanation / Answer
a. If a branch fails to process at least 50,000 transactions, the branch is closed. Branches that process more than 80,000 transactions are transferred out of the start-up division. Accordingly, the relevant range is 50,000 to 80,000 transactions.
b.
Number of Transactions (a)
50,000
60,000
70,000
80,000
Total teller cost (b)
$96,000
$96,000
$96,000
$96,000
Average per unit teller cost (b ÷ a)
$1.92
$1.60
$1.37
$1.20
Type of Cost: Since the total teller cost remains constant at $96,000 regardless of the number of transactions processed, it is a fixed cost.
c.
Number of Branches (a)
15
20
25
30
Teller costs per branch (b)
$96,000
$96,000
$96,000
$96,000
Total teller cost (a x b)
$1,440,000
$1,920,000
$2,400,000
$2,880,000
Type of cost: Since the total teller cost increases proportionately with the number of branches in operation, it is a variable cost.
b.
Number of Transactions (a)
50,000
60,000
70,000
80,000
Total teller cost (b)
$96,000
$96,000
$96,000
$96,000
Average per unit teller cost (b ÷ a)
$1.92
$1.60
$1.37
$1.20
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