At the BlueFin Bank corporate headquarters, management was discussing the potent

Question

At the BlueFin Bank corporate headquarters, management was discussing the potential of outsourcing the processing of credit card transactions to DataEase, an international provider of banking operational services. Processing of the transactions at BlueFin has been a costly element of the annual profit and loss statement and the continual investment in equipment to keep up to date has been draining capital reserves. Based upon initial study and negotiations, DataEase will charge $0.01 more per transaction than BlueFin's cost per transaction, and DataEase will want $8 million per year to cover equipment and overhead costs associated with the contract. BlueFin has yet to develop an estimate for the annual overhead and fixed costs assoclated with processing the transactions. These costs include supervision, administrative support, maintenance, equipment depreclation, and overhead If BlueFin must process 17 million transactions per year, how high must those fixed costs be before it would pay to use DataEase? The fixed costs must be higher than S(Enter your response as an integer.)

Explanation / Answer

For breakeven point, the total cost should be equal.

Total cost for in-house = Fixed cost

Outsourcing = 8*10^6 + 0.01*Number of units = 8*10^6 + 0.01*17*10^6

So,

Fixed cost = 8*10^6 + 0.17*10^6

Fixed cost = 8.17 Million

The fixed cost must be higher than 8 Million

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.