Question

Ray estimates that the fixed costs associated with opening a new bank branch are $500,000. He expects the branch to attract 1,000 new customer accounts in the first year, each of which will cost $50 per year to service. He also expects to generate $100,000 per year in revenue. For Ray, the total cost of opening the new branch and remaining open for one year will be:

Answer 1

For Ray, the total cost of opening the new branch and remaining open for one year will be $550,000

Step-by-step explanation:

Given ,

Fixed costs = $500,000

1,000 new customer accounts in the first year

Cost $50 per year to service

Total costs = fixed costs + variable costs

Total costs =500,000 + (1,000* 50) = $550,000.

Revenues are not a factor when calculating total costs.