Question

Raymond 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 Raymond, the total cost of opening the new branch and remaining open for one year will be:___________.
A. $550,000.
B. $650,000.
C. $450,000.
D. $500,000.
E. $605,000.

Answer 1

Answer:

= $550,000.

Explanation:

Given that:

• Fixed cost = $500,000
• 1,000 new customer accounts in the first year
• Cost $50 per year to service

As we know that :

the total cost of opening the new branch and remaining open for one year = fixed cost + variable cost

= $500,000 + (50*1000)

=  $500,000 + $50,000

= $550,000

Hope it will find you well.