Automated billings Beta has an opportunity to automate some of the billing process so that customers can use a direct account deduction. Moving to an automated billing process is voluntary for customers and Beta does not know what percentage will move. There are currently 100,000 customers. The cost of the billing process as currently constituted is $40,000 of annual fixed cost and $0.20 per bill. Automating the billing will result in a total of $50,000 of annual fixed cost, which is to say that some of the prior fixed cost will continue and Beta will need new software and equipment. Variable costs for any automated bill will drop to $0.04 per bill. How many customers must switch to the automated billing process to break even with this opportunity? Comments: This strikes me as another opportunity cost' problem. Let's say that we have X switchers. This suggests that we have 100,000 - X) non-switchers. See whether you can identity Beta's cost right now, with 100,000 customers in a non-automated setting. Maybe it's $50,000. Maybe it's $100,000. Maybe it's some other number. Identify the cost right now. That's the benchmark opportunity cost. The question is "at what level of X, will the investment in automation beat the opportunity cost?" This seems like the level of where (1) the cost of (100,000 - X) non-switches equals (2) the cost of the X switchers. Sticky costs I was looking at a lot of data across a lot of years, companies, and industries and I noticed the following: When sales increased by 10 percent, total operating expenses increased by 9 percent. When sales decreased by 10 percent, total operating expenses decreased by only 5 percent. Maybe this pattern of total operating expenses could be described as "sticky.' Costs seemed to readily go up to follow sales, but costs did not decrease as readily when sales fell. Required: 1. Why might costs be sticky? One proposal is that management is optimistic about the future and readily builds capacity for expansion and is reluctant to reduce capacity. Another, perhaps less rational thought, is that management becomes attached to the new (costly) activities and it reluctant to cut it. Finally, another less rational thought is that management engages in empire building" at any opportunity and is reluctant to cut it. Feel free to select from these or suggest your own thoughts based on your experience. 2. What does this mean for our ability to build cost-volume-profit representations for the organization? Comments: There will be no right or wrong response here. Provide a little speculation, based on your experience or intuition about why costs might be sticky. 0212 Jay L. 1. Corporated in the titted 300.000 capitati The company 34.000 to cover the rent for the office space the primary 2011 December 31, 2022 On March 30XL. MSK stered to which Frances Corpo promised to provide conting to MSK Inforetan, MSK to pay of S190.00, which was to be paid in January 2002. Free collation during 2X1 Oy. Frospechased office comment for 500.000 The mert has an estimated to the year ago The duty placed interese. Frances et tegne metode de the depreciation expense op to the new Thor, 201, they had po 4.000 11 mostres Accessories on Deonter 301. So.com On Demaniowe Frames Competicies to provided during Ry 1. Pride rent for each of these acties 2. Provides the end of the year X Prepare an income trenger for the your ended December 31, X1. po me te Pure blance sheet of December The cotton solament of change the saling Oren Verby Deert 31.2014, went AR 150.000 3180200 As here me some check form for the financial statements Netcome $56.000 Total Aleti are 22.000 Totals. harder 25.000 19 . 36 Dashboard Calendar To Do Notifications Inbox Inbox
