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how high must those fixed costs be before it would pay to use DataEase?

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

 

STERLING INVENTORY ITEMS

 

Catagory

Part Number

Average Inventory Units

Value per Unit

Raw materials

RM- 1

20.000

S1

 

RM-2

5.000

5

 

RM-3

3,000

6

 

RM-4

1,000

8

Work-In-process

WIP 1

6.000

10

 

WIP-2

8.000

12

Finished goods

FG-1

1.000

65

 

FG-2

500

88

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 $0.02 more per transaction than BlueFin"s cost per transaction. and DataEase will want $12 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 associated with processing the transactions. These costs include supervision, administrative support, maintenance, equipment depreciation. and overhead. If BlueFin must process 20 million transactions per year. how high must those fixed costs be before it would pay to use DataEase?

 

Aug 05 2020 View more View Less

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