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Graphic Printing Company currently leases its only copy machine for $2,000 a month. The company is considering replacing this leasing agreement with a new contract
Graphic Printing Company currently leases its only copy machine for $2,000 a month. The company is considering replacing this leasing agreement with a new contract that is entirely commission based. Under the new agreement, Graphic would pay a commission for its printing at a rate of $20 for every 500 pages printed The company currently charges 50.32 per page to its customers. The paper used in printing costs the company 50.02 per page and other variable costs, including hourly labor, amount to $0.10 per page Read the 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 Graphic prefer (a) the fixed lease agreement and (b) the commission agreement? 3. Graphic estimates that the company is equally likely to sell 18,000 28,000, 38,000, 48.000, or 58,000 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 Graphic choose? 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 2.000 Contribution margin per unit 0.20 Breakeven number of units 10.000 s 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
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