Assume that ABC Bank produces product A for a corporate client, while XYZ Bank produces product B for the client. The total operating cost for producing product A is $200 000 and $300 000 for product B. The resulting business volumes for the FI are $7 500 000 for product A and $10 000 000 for product B. What is the total average cost of producing products A and B separately (round to two decimals)?

Question

Quizplus · Accepted Answer

The total average cost is calculated by dividing the total operating cost by the total business volume. For product A, the average cost is ($200,000 / $7,500,000) * 100 = 2.67%. For product B, it is ($300,000 / $10,000,000) * 100 = 3%. The total average cost is the sum of these two percentages, which is approximately 2.86%.

Assume That ABC Bank Produces Product a for a Corporate