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 equipment to keep up to date has been draining capital reserves. Based upon initial study and negotiations, DataEase will charge $0.05 more per transaction than BlueFin's cost per transaction, and DataEase will want $12 million per year to cover equipmen 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 15 million transactions per year, 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 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 $0.05 more per transaction than BlueFin's cost per transaction, and DataEase will want $12 million per year to cover equipmen 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 15 million transactions per year, how high must those fixed costs be before it would pay to use DataEase?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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 equipment to keep up to
date has been draining capital reserves.
Based upon initial study and negotiations, DataEase will charge $0.05 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 15 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 $
.
(Enter your response as an integer.)

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