PRINTER SYSTEMS LTD.

Printer Systems 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 Printer Systems 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:

3. Printer Systems is considering the option of opening a new retail outlet which will increase salaries by $40,000; insurance by $10,000 and rent expense 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). Calculate the following:

   A. Impact on Printer Systemss expected profits for the year B. new break-even point in quantity of printer C. new break-even point in sales dollars

Budgeted Costs Unit Sales Price Direct Labour / Unit Direct Materials / Unit Variable Mfg. OH / Unit Depreciation Insurance Expense Salaries Expense Rent Expense $ 5,000 1,386 1,433 1,195 150,000 50,000 10,000 15,000