VERY URGENT PLEASE ANSWER ASAP!!
Ground Entertainment is a provider of cable, intemet, and on-demand video services. Ground currently sends monthly bills to its customers via the postal service. Because of a concern for the environment and recent increases in postal rates, Ground management is considering offering an option to its customers for paperless billing. In addition to saving printing, paper, and postal costs, paperless billing will save energy and water (through reduced paper needs, reduced waste disposal, and reduced transportation needs). While Ground would like to switch to 100% paperless billing, many of its customers are not comfortable with paperless billing or may not have Web access, so the paper billing option will remain, regardless of whether Ground adopts a paperless billing system or not. Requirement 1. Calculate the variable cost per bill mailed under the current paper-based billing system. Using the high-low method, the variable cost per bill mailed under the current paper-based billing system is $(Round your answer to the nearest cent.) Requirement 2. Assume that the company projects that it will have a total of 620,000 bills to mail in the upcoming quarter. If enough customers choose the paperless billing option so that 30% of the malings can be converted to paperless, how much would the company save from the paperless billing system (be sure to consider the cost of the paperless billing system)? The company would save $trom using the paperless billing system. Requirement 3. What if only 25% of the malings are converted to the paperless option (assume a total of 620,000 bills)? Should the company still offer the paperless biling system? Explain your rationale. (Enter any losses as a positive number.) If only 25% of the mailings are converted to the paperless option, the company offer the paperless billing system because the company $ from using the paperless billing system. Cost information The cost of the paperless billing system would be $101,000 per quarter with no variable costs since the costs of the system are the salaries of the clerks and the cost of leasing the computer system. The paperless billing system being proposed would be able to handle up to 740,000 bills per quarter. (More than 740,000 bills pe quarter would require a different computer system and is outside the scope of e current situation at Ground.) Ground has gathered its cost data for the past year by quarter for paper, toner cartridges, printer maintenance costs, and postage costs for the billing department. The cost data are as follows: Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total paper, toner, printer maintenance, and postage costs Total number of bills malled. 658,000 S 510,000 670,000 $ 550,000 790,000 S 730,000 680,000 570,000
