HW PROBLEM 1

Banners-R-US is considering leasing a machine to custom print athletic team banners. The supplier is proposing a 3 year lease at $10,000 a month plus $.01 per impression. Banners-R-Us would also have to buy ink at an estimated cost of $.02 per impression and hire a machine operator at a cost of $6,000 per month. Customers will supply the banner material.

a) If they charge $.08 per impression, how many impressions would they have to sell to generate a monthly profit of $5,500?

b) Banners-R-Us is also considering an offer to purchase the machine outright vs. leasing it. Assuming an estimated useful life for the machine of 3 years, what is the maximum amount they should pay for the machine assuming they want to maintain the same profit targetfor the 3 year period (assuming the monthly sales level you projected in part a is achieved)?

HW PROBLEM 2

Harvey runs a food truck that sells gyros in a local industrial park. In September his sales were $15,000 and his total operating costs including food and marketing expenses were $16,600. In October sales increased to $17,000 and his costs increased to $18,100.

Assuming the cost behavior in these 2 months is representative of what he can expect in the future, what is Harvey's breakeven sales level? $ __________________________________