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 $0.02
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 pro-
cess 20 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 $0.02 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 20 million transactions per year, how high must those fixed costs be before it would pay to use DataEase?