People's Public Power is an electric utility company. The new CEO is interested in implementing new projects that will not only benefit the environment, but will also benefit the company through cost savings. One of the proposed projects is to offer a paperless, online billing solution for its customers in Green Township. Preliminary market research indicates that participation in the paperless option will be between 20 - 30% of customers.
Total costs for the paperless system are projected to be $100,000 per quarter, which are comprised solely of fixed costs for IT personnel and computer hardware. The CEO has asked you to perform an analysis of the proposed paperless billing system.
Historical costs for the current paper-based system are as follows:
Requirements:
a. Using the historical costs calculate the variable costs per bill under the current system.
b. The company projects that next quarter 650,000 bills will be mailed to customers. What is the projected cost savings if the maximum number, 30%, of customers choose the paperless system?
c. What is the projected cost savings if the minimum number, 20%, of customers choose the paperless system?

Question

People's Public Power is an electric utility company. The new CEO is interested in implementing new projects that will not only benefit the environment, but will also benefit the company through cost savings. One of the proposed projects is to offer a paperless, online billing solution for its customers in Green Township. Preliminary market research indicates that participation in the paperless option will be between 20 - 30% of customers.
Total costs for the paperless system are projected to be $100,000 per quarter, which are comprised solely of fixed costs for IT personnel and computer hardware. The CEO has asked you to perform an analysis of the proposed paperless billing system.
Historical costs for the current paper-based system are as follows:
  Requirements:
a. Using the historical costs calculate the variable costs per bill under the current system.
b. The company projects that next quarter 650,000 bills will be mailed to customers. What is the projected cost savings if the maximum number, 30%, of customers choose the paperless system?
c. What is the projected cost savings if the minimum number, 20%, of customers choose the paperless system?

Quizplus · Accepted Answer

The Answer of People's Public Power is an electric utility company. The new CEO is interested in implementing new projects that will not only benefit the environment, but will also benefit the company through cost savings. One of the proposed projects is to offer a paperless, online billing solution for its customers in Green Township. Preliminary market research indicates that participation in the paperless option will be between 20 - 30% of customers.
Total costs for the paperless system are projected to be $100,000 per quarter, which are comprised solely of fixed costs for IT personnel and computer hardware. The CEO has asked you to perform an analysis of the proposed paperless billing system.
Historical costs for the current paper-based system are as follows:
  Requirements:
a. Using the historical costs calculate the variable costs per bill under the current system.
b. The company projects that next quarter 650,000 bills will be mailed to customers. What is the projected cost savings if the maximum number, 30%, of customers choose the paperless system?
c. What is the projected cost savings if the minimum number, 20%, of customers choose the paperless system?

People's Public Power Is an Electric Utility Company