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:

Question

Lilyana Colon

Business

1 July, 19:40

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:

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Gisselle Hart · Answer 1

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

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.