Question

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Printing Company currently leases its only copy machine for

$ 1 comma 800$1,800

a month. The company is considering replacing this leasing agreement with a new contract that is entirely commission based. Under the new​ agreement,

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would pay a commission for its printing at a rate of

$ 10$10

for every 500 pages printed. The company currently charges

​$0.250.25

per page to its customers. The paper used in printing costs the company

$ 0.06$0.06

per page and other variable​ costs, including hourly​ labor, amount to

$ 0.10$0.10

per page.Read the requirements

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.

Requirement 1. What is the​ company's breakeven point under the current leasing​ agreement? What is it under the new​ commission-based agreement?

​First, determine the formula used to calculate the breakeven point in​ units, then calculate the​ company's breakeven point under the current leasing agreement. ​(Enter a​"0" for any zero​ balances.)

Fixed costs	/	Contribution margin per unit	=	Breakeven number of units
	/		=

1.

What is the​ company's breakeven point under the current leasing​ agreement? What is it under the new​ commission-based agreement?

2.

For what range of sales levels will

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prefer​ (a) the fixed lease agreement and​ (b) the commission​ agreement?

3.

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estimates that the company is equally likely to sell

20 comma 00020,000​,

30 comma 00030,000​,

40 comma 00040,000​,

50 comma 00050,000​,

or

60 comma 00060,000

pages of print. Using information from the original​ problem, prepare a table that shows the expected profit at each sales level under the fixed leasing agreement and under the​ commission-based agreement. What is the expected value of each​ agreement? Which agreement should

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​choose?

Answer 1