Question

Just need help with requirement 3 please! thank you

Deckle Printing Company currently leases its only copy machine for $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, Deckle would pay a commission for its printing at a rate of $10 for every 500 pages printed. The company currently charges $0.21 per page to its customers. The paper used in printing costs the company $0.07 per page and other variable costs, including hourly labor, amount to $0.10 per page. Read the requirements. பப பபபபாடியபப பபப பபபபப i Requirements Þ, or 65,000 pages of print. Using information from the agreement and under the commission-based agreement. 3. 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 Deckle prefer (a) the fixed lease agreement and (b) the commission agreement? Deckle estimates that the company is equally likely to sell 25,000, 35,000, 45,000, 55,000, or 65,000 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 Deckle choose? Print Done Total expected profit/(loss) =

Answer 1

	25000		35000		45000		55000		65000
	Lease	Commission Based	Lease	Commission Based	Lease	Commission Based	Lease	Commission Based	Lease	Commission Based
Revenue	$          5,250	$          5,250	$          7,350	$          7,350	$          9,450	$          9,450	$        11,550	$        11,550	$        13,650	$        13,650
Less Variable Expenses
Printing Costs	$          1,750	$          1,750	$          2,450	$          2,450	$          3,150	$          3,150	$          3,850	$          3,850	$          4,550	$          4,550
Labor	$          2,500	$          2,500	$          3,500	$          3,500	$          4,500	$          4,500	$          5,500	$          5,500	$          6,500	$          6,500
Commission		$              500		$              700		$              900		$          1,100		$          1,300
Total Variable Expenses	$          4,250	$          4,750	$          5,950	$          6,650	$          7,650	$          8,550	$          9,350	$        10,450	$        11,050	$        12,350
Contribution Margin	$          1,000	$              500	$          1,400	$              700	$          1,800	$              900	$          2,200	$          1,100	$          2,600	$          1,300
Less Fixed Expenses	$          1,800		$          1,800		$          1,800		$          1,800		$          1,800
Net Operating Income	$           (800)	$              500	$           (400)	$              700	$                 -	$              900	$              400	$          1,100	$              800	$          1,300
Choice		Commission Based		Commission Based		Commission Based		Commission Based		Commission Based