Question

BREAKEVEN ANALYSIS – Cost Volume Analysis You are trying to select between four online Help Desk plans from the Geek Squad. The Black Belt plan costs $29.95 / month plus $1 / online response, the Brown Belt plan costs $19.95 / month plus $3 / online response, the Green Belt plan costs $9.95 / month plus $5 / online response, and the No Plan option costs a flat $10 / question with no monthly fee.

_________ 2a) At what RANGE of monthly problems is it worthwhile to get the Green Belt plan?

_________ 2b) If you expect to have 6 problems per month, which plan should you get?

_________ 2c) What is the maximum number of monthly requests that makes it worthwhile to not purchase any plan?

Answer 1

Let's draw the equation of each line on a single graph with cost on y-axis and number of responses on x-axis. The graph is as follows:

a) To find out the range, let's see where the green belt plan has the lowest cost. The range is: [2, 5] responses both 2 and 5 included

b) If we plan to have 6 problems per month, we will see which plan has the lowest cost. The plan is Black belt.

c) The maximum number of monthly requests that makes it worthwhile to not purchase any plan is till the value till the No-plan line has the lowest cost. Hence, x = 2