Digital Printing Company currently leases its only copy machine for $1,400 a month. The company is considering replacing this leasing agreement with a new contract that is entirely commission based. Under the new agreement, Digital would pay a commission for its printing at a rate of $10 for every 500 pages printed. The company currently charges $0.25 per page to its customers. The paper used in printing costs the company $0.06 per page and other variable costs, including hourly labor, amount to $0.12 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 O" for any zero balances) Breakeven number of units What is it under the new commission-based agreement? (Enter a "o" for any zero balances.) The company's breakeven point under the new commission-based agreemont is units Requirement 2. For what range of sales levels will Digital prefer (a) the fixed lease agreement and (b) the commission agreement? In order to determine the range of sales levels Digital would prefer for each agreement, we must first calculate the indifference point Tho indifference point Now calculate the indifference point. (Round to the nearest whole number) The indifference point is at Digital would prefer the fixed lease agreement at The commission based agreement would be preferred at Requirement 3. Digital estimates that the company is equ or 70,000 pages of print. Using information from the original problem prepare a table that shows the leasing agreement and under the commission based agreement. What is the expected valu gital choose? O units up to the indifference point Begin with the fixed leasing agreement (Use parentheses the indifference point units sales more than the indifference point Next under the new commission-based agreement is units. of sales levels will Digital prefer (a) the fixed lease agreement and (b) the commission agreeme of sales levels Digital would prefer for each agreement, we must first calculate the indifference po Doint. (Round to the nearest whole number.) units. Base agreement at ment would be prefe O units up to the indifference point ates that the compai pare a table that she nt. What is the expec agreement. (Use pare 60,000, or 70,000 pages of prin he fixed leasing agreement and should Digital choose? the indifference point sales more than the indifference point Requirement 3. Digital 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 Digital choose? Begin with the fixed leasing agreement. (Use parentheses or a minus sign for losses.) Fixed leasing agreement Expected Sales level Profill(Loss) Profit/(Loss) 30,000 40.000 50,000 60,000 70,000 Total expected profit/(108) Next, calculate the expected profit at each sales level under the commission based agreement Commission-based agreement Expected Sales lovel Profill(LOS) Profit/(105) 30,000 40,000 50.000 60,000 70,000 Total expected profil(105) Next Expected Profit (Loss) Sales level Profit (Loss) 30,000 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. Commission-based agreement Expected Sales level Profit/(Loss) Profit/(Loss) 30,000 40,000 50,000 neither 60,000 the fixed lease 70,000 Total expected profit/( the commission-based Digital should choose agreement equirements. Jased agreem Requirements ent 1. W frent leasing rmine the t. (Enter 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 Digital prefer (a) the fixed lease agreement and (b) the commission agreement? 3. Digital 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 Digital choose? under the pany's bird ment 2. F to determil fference pl Print Done culate the ifference pomesa US would prefer the fixed lease agreement at mmission based agreement would be preferred at