EZ Print LTD. produces and sells printing products across Canada. Last year, sales volume totaled $850,000. Volume for the first five months of the current year totaled $600,000, and sales were expected to be $1.6 million for the entire year. Unfortunately, the printing business in the region where EZ Print is located is extremely competitive. More than 100 printing shops are all competing for the same business.

The company currently manufactures one type of high-quality printer with the average unit selling prices, unit variable costs, and direct fixed costs are as follows:

Budgeted costs: $

Unit sale price: 5000

Direct labour/unit 1386

Direct materials/unit 1433

Variable Mfg. OH / unit 1195

Depreciation 150000

Insurance expense 50000

Salaries expense 10000

Rent expense 15000

Required:

1) EZ Print can buy machines that will make the majority of the printer parts. If the company chooses to purchase the machines, the variable costs will decrease by 8% but the fixed costs will increase by $52,000. The plan would be to purchase the machine at the beginning of July. Fixed costs for the company are incurred equally throughout the year.

a. impact on operating income

b. new number of printers to break even.

c. sales dollars to break even.

2) EZ Print is considering the option of opening a new retail outlet, which will increase salaries by $40,000, insurance by $10,000, and rent expenses by $30,000 per year. This is expected to increase sales by 25 percent, and the plan would be to open this up at the beginning of July (halfway through the upcoming year).

a. Impact on EZ Print's expected profits for the year

b. new break-even point in quantity of printers

c. new break-even point in sales dollars

3) draft a memo to the CFO of EZ Print discussing your recommendations from both 1 & 2 above. on both quantitative and qualitative factors in your recommendation.