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Individual Problems 6-3 Pricing ATM Machines A bank in a medium-sized Midwestern city, Firm X, currently charges $1 per transaction at its ATM's.

Individual Problems
6-3 Pricing ATM Machines
A bank in a medium-sized Midwestern city, Firm X, currently charges $1 per transaction at its ATM’s. To determine whether to raise price , the bank managers experimented with a number of higher prices (in 25-cent increments) at selected ATM’s. The Marginal cost of an ATM transaction is $0.50.
ATM Fee Usage
$2.00 1,000
$1.75 1,500
$1.50 2,000
$1.25 2,500
$1.00 3,000

What ATM fee should the bank charge?

7.4 Learning Curves

Suppose you have a production technology that can be characterized by a learning curve. Every time you increase production by one unit, your costs decrease by $6. The first unit costs you $64 to produce. If you receive a request for proposal (RFP) on a project for four units, what is your break-even price? Suppose that if you get the contract, you can win another project for two more units. Now what is your break-even price for those two units?

7-5 Multiconcept Restaurants Are a Growing Trend

A multiconcept restaurant incorporates two or more restaurants, typically6 chains, under one roof. Sharing facilities reduces costs of both real estate and labor. The multiconept restaurants typically offer a limit menu, compared with full-sized, stand-alone restaurants. For example, KMAC operates a combination Kentucky Fried Chicken (KFC)/Taco Bell restaurant. The food preparation areas are separate, but orders are taken at shared point-of-sale (POS) stations. If Taco Bell and KFC share facilities, they reduce fixed costs by 30%; however, sales in joint facilities are 20% lower than sales in two separate facilities. What do these numbers imply for the decision of when to open a shared facility versus two separate facilities?

This question was asked on Jan 24, 2013.

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