Exhibit 1 contains information related to iPrint's monthly operating costs for the company's current activity level of 150,000 brochures per month.

The company typically priced its printing services at an average of $17 per 100 brochures printed. The compony received two offers:

The Special Order:

Valerie Smith needs 25,000 brochures for $10 per 100 brochures. IPrint realized that with this order they wouldn't have to pay the sales representative the typical sales commission of $1 per 100 brochures, but that $1 savings would begin to make up for the lower price.

The Outsourcing Opportunity:

Earle Beardsley offered to supply IPrint $8 per 100 brochures. And he could handle 30,000 brochures for you next month.

iPrint Company

Summary of Monthly Operating Costs

150.000 volume

Direct materials $ 6,000

Direct hourly labour 1,500

Direct salaries 3,000

Manufacturing equipment depreciation 1,575

Manufacturing mortgage expense 1,800

Manufacturing overhead - variable 1,500

Office depreciation 750

Office salaries 3,000

Selling expense - commissions 1,500

Selling expense - fixed 1,875

Total costs $ 22,500

Required:

A. What is the current situation regarding Thompson's financials position and reporting? - Create a financial statement that will be useful for Thompson for analysis purposes. (unit costs and totals where appropriate). Abbreviations allowed (i.e. DM for direct materials)

B. Address the following in your report:

1. Determine the break-even point for iPrint in both units (total brochures) and in sales dollars.

2. Option 1. Consider the special order from Valerie Smith. Should iPrint accept the order at $10 per 100 brochures given they are currently operating at capacity? Provide both quantitative and qualitative analysis. If Thompson could expand capacity by adding production to a Sunday or night shift, would your recommendation change?

3. Option 2. Consider the outsourcing opportunity from Earle Beardsley of SmallPrint Shop. Should iPrint outsource 30,000 brochures, of its current operations, to SmallPrint? Provide both a quantitative and qualitative analysis.

4. Option 3. Combination. Would it be profitable for iPrint to accept and print the special order for Valerie Smith, while outsourcing 25,000 brochures to SmallPrint? Provide a combined statement showing operating income should both alternatives be considered