Please show all work. At the BlueFin Bank corporate headquarters, management was

Question

Please show all work.

At the BlueFin Bank corporate headquarters, management was discussing the potential of outsourcing the processing of credit card transactions to DataEase, an intermational 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 50.01 more per transaction than BlueFin's cost per transaction, and DataEase will want $6 million per year to cover equipment and overhead costs associated with the contract. Bluenhas 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 de overhead If BlueFin must process 18 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

Fixed payment Bluefin is paying to Dataease = $6 million

Variable payment Bluefin is paying to database = $0.01 more than per transaction of Bluefin's cost

If bluefin mus process 18 million transaction than Blue fin will pay Dataease = 18*0.01 = $0.18 million more for every transaction

Bluefin is outsourcing to save cost

Bluefine fixed cost must be more than fixed cost Bluefin paying to Dataease + 0.18 million which Bluefin is paying more for 18 million transactions

Therefore, Bluefin's fixed cost must be higher than = 6+0.18 = $6.18 million

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