In 1995, was about 10% excess capacity (on average) in the operating expense base. Capacity grew at a compound rate of about 26% from 1995 to 1999, versus households growth at about 21%. As a result, excess capacity in 1999 was a much larger percentage of the expense base, across branches, the call center, on-line activity, transactions processing and account maintenance activity. There are currently 3,880,000 customers, and cost for current customers is 1,381,300,000 which includes excess capacity.

The question is: Noting that excess capacity is charged back to active accounts, if AIMS scaled back to 3,000,000 active households and planned only a 10% excess capacity reserve for future growth, a large proportion of cost could be eliminated. Estimate how much of total cost for 1999 could be eliminated.

Answer rating: 100% (QA)

if we take base 100 in 1995 than in 1995 capacity was 110 add 26 from ... View the full answer