The Vend-O-Bait Company operates and services fishing-bait vending machines placed in service stations, motels and restaurants surrounding a large lake. Vend-O-Bait rents 200 machines from the manufacturer. It also rents the space occupied by the machines at each location where it places them. Arnie Bass, the business’s owner, has two employees who service the machines. Monthly fixed costs for the business are as follows:

Currently, Vend-O-Bait’s only variable cost is the bait, which it purchases for $1.20 per pack. Vend-O-Bait sells this bait for $1.80 per pack.
Required:
a Answer the following questions:
i What is the monthly break-even point (in packs sold)?
ii Compute Vend-O-Bait’s monthly profit at monthly sales volumes of 52 000, 56 000, 64 000 and 68 000 packs, respectively.
b Suppose that instead of paying $60 fixed rent per month, Arnie Bass could arrange to pay $0.20 for each pack of bait sold at each location to rent the space occupied by the machines. Repeat all calculations in (a).
c Would it be desirable for Arnie Bass to try to change his space rental from a fixed cost ($60 per location) to a variable cost ($0.20 per pack sold)? Why or why not?

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Machine rental: 200 machines x $100 per month Space rental: 200 locations $60 per month Employee wages: 2 employees x $800 per month Other fixed costs Total $20 000 12 000 1 600 2 400 $36 000