Farmers & Ranchers Bank was formed in 1913 to provide banking services to an area of the rural southwestern United States. Their business consisted primarily of crop and cattle production loans to the local agricultural community. During the 1960's oil and natural gas were discovered in the area which has provided an additional customer base of industry personnel. These personnel together with local supporting businesses created additional demand for personal banking services. By the 1980's the Bank had established several dozen branches in smaller communities. At that time, the bank began installing an Automated Teller Machine (ATM) at these branches. The ATMs not only provided additional hours of service, they replaced a few of the tellers. While tellers do remain in most locations, the number of tellers has grown very little. The number of ATMS, on the other hand, has grown substantially to the present. Some larger branches have more than one ATM and some locations are only an ATM.

1.

Using a unit level analysis, develop a graph with two lines representing the Bank's cost

structure. (Be sure to label the axes and lines. You must develop the appropriate data to

support the answers in your graph.)

o In the 1980s

o at the present time

Solution

For 1913, the cost function can be given byC=2000000+15x

C= cost, where x=for every 1000 clients. The range of the values id from 1-10.

After calculating the corresponding values of the costs, the values are as shown below. Excel

At the present, the cost function would be given as:

C=5000000+7x

C= cost

X= (in 1000 customers), the range of the values for x are from 1-10 and the corresponding costs are in the table.The plot of the data are given in the graph below.

Where do they get these numbers for the solutions???