Composite Printing Company currently leases its only copy machine for $1,300 a month. The company is considering replacing this leasing agreement with a new contract that is entirely commission based. Under the new agreement, Composite would pay a commission for its printing at a rate of $10 for every 500 pages printed. The company currently charges $0.30 per page to its customers. The paper used in printing costs the company $0.08 per page and other variable costs, including hourly labor, amount to $0.09 per page. Read the requirements. 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 1300 What is it under the new commission-based agreement? (Enter a "0" for any zero balances.) The company's breakeven point under the new commission-based agreement is units. Requirement 2. For what range of sales levels will Composite prefer (a) the fixed lease agreement and (b) the commission agreement? In order to determine the range of sales levels Composite would prefer for each agreement, we must first calculate the indifference point. The indifference point = Now calculate the indifference point. (Round to the nearest whole number.) The indifference point is at units. Composite would prefer the fixed lease agreement at The commission based agreement would be preferred at Requirement 3. Composite estimates that the company is equally likely to sell 30,000, 40,000, 50,000, 60,000, or 70,000 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 Composite choose? Begin with the fixed leasing agreement. (Use parentheses or a minus sign for losses.) Fixed leasing agreement Sales level Profit/(Loss) 30,000 Expected Profit/(Loss) 40,000 50,000 60,000 70,000 Total expected profit/(loss) Next, calculate the expected profit at each sales level under the commission based agreement. Next, calculate the expected profit at each sales level under the commission based agreement. Commission-based agreement Expected Sales level Profit/(Loss) Profit/(Loss) 30,000 40,000 50,000 60,000 70,000 Total expected profit/(loss) Composite should choose agreement. Requirements 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 Composite prefer (a) the fixed lease agreement and (b) the commission agreement? 3. Composite estimates that the company is equally likely to sell 30,000, 40,000, 50,000, 60,000, or 70,000 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 Composite choose? Print Done