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Flexo 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
Flexo 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, Flexo 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 $0.02 per page and other variable costs, including hourly labor, amount to $0.09 per page. Requirement 3. Flexo estimates that the company is equally likely to sell 26,000, 36,000, 46,000, 56,000, or 66,000 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 Flexo choose? Begin with the fixed leasing agreement. (Use parentheses or a minus sign for losses.) Fixed leasing agreement Expected Sales level Profit/(Loss) Profit/(Loss) 26,000 36,000 46,000 56,000 66,000 Total expected profit/(loss)
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