Thornton Bank\'s start-up division establishes new branch banks. Each branch ope

Question

Thornton 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 Required What is the relevant range of activity for new branch banks? Determine the amount of teller cost in total and the average teller cost per transaction for a branch that processes 50,000, 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 fixed or a variable cost? a. b. c. Determine the amount of teller cost in total and the average teller cost per branch for Thornton Bank, assuming that the start- up division operates 30, 35, 40 or 45 branches. In thig case (the activity base is the number of branches), is the teller cost a fixed or a variable cost?

Explanation / Answer

A)

B)

C)

Given that we require 3 tellers for one branch and total teller cost per branch is $96000 Since the branch will be closed if it doesnot attain atleast 50000 transactions and if the demand exceeds 80000 transactions the branch will be transferred from start up division to regular operations. There fore,the relevant range of activity for new branch banks is 50000-80000

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