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

Let the maximum permissible fixed cost or Blue Fin = $ F

Number of annual transactions = 18 million

Total cost = Annual fixed cost + Variable cost / transaction x Number of annual transactions

                    = Annual fixed cost + 18,000000 x Variable cost/ transaction

For Blue Fin bank to pay to use DataEase,

Total cost of Data Ease < = Total cost of Blue Fin Bank

Or, 6,000000 + Variable cost/ transaction x 18,000000 < = F + Variable cost/ transaction x 18,000000

Or F >= 6,000000 + ( Variable cost / transaction for Data ease – Variable cost/ transaction for Blue Fin ) x 18,000000

Or, F > = 6,000000 + 0.01 x 18,000000

Or, F > = 6,000000 +180000

F > = 6180000

THE FIXED COST MUST BE HIGHER THAN $ 6180000

THE FIXED COST MUST BE HIGHER THAN $ 6180000

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