work: Chapter 10 homework (Supply Chain Design) 1 Advanced Problem 10.11 Exercis

Question

work: Chapter 10 homework (Supply Chain Design) 1 Advanced Problem 10.11 Exercise Score: 0 of 25 pts Assignment Score: 0% (0 of 100 pts) 0 of 3 complete 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 eguipment to keep up to date has been draining capital reserves Based upon initial study and negotiations, DataEase will charge S0.05 more per transaction than BlueFin's cost pertransaction, and DataEase will want S 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 20million 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

Amount charged by data ease fpr processing the transactions exceeds current cost by $0.05 per transaction

and in addition $7 million per year will also be charged for equipment and ovrhed cost associated with the cost.

Therefore additional cost to be incurred if transaction processing is outsourced is = (20M*0.05$)+$7million

= $8M

Thus Fixed cost must be higher than $8Million.

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