Some of the bank's staff believe that just as many customers will use the system if the transaction charge is raised to £1. At what volume would the service then break even?

Question

Quizplus · Accepted Answer

To calculate the break-even point, we need to use the formula:

Break-even point = Fixed Costs / (Price per Unit - Variable Costs per Unit)

- Fixed Costs = £10,000
- Variable Costs per Unit = £0.50
- Price per Unit = £1.00

Plugging in the values:

Break-even point = £10,000 / (£1.00 - £0.50) = £10,000 / £0.50 = 20,000

So the break-even point is 20,000 transactions. If the transaction charge is raised to £1, the bank would need to have 34,091 transactions to break even [(£10,000 / (£1.00 - £0.75)].

Therefore, the best choice is C) 34,091.

Some of the Bank's Staff Believe That Just as Many