Requirement 3. Direct estimates that the company is equally likely to sell 22,000, 32,000, 42,000, 52,000, or 62,000 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 Direct 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) 22,000 32,000 42.000 52,000 62,000 Total expected profit(loss) Enter any number in the edit fields and then click Check Answer. Solution Indifference point units: Let the sales unit =X According to question indifference point can be Calaculated as follows: Alternative 1=alternative 2 Fixed cost+variable cost*sales units $1200+$0.13 X=0+$0.18 x $1200=$0.18 X - $0.13 X $1200=$0.05 X X=$1200/$0.05 X= 24000 units So indifference point is at 24000 units Direct Printing Company currently teases its only copy machine for $1,200 a month. The company is considering replacing this leasing agreement with a new contract that is entirely commission based Under the new agreement, Direct would pay a commission for its printing at a rate of $25 for every 500 pages printed The company currently charges $0.23 per page to its customers. The paper used in printing costs the company $0.05 per page and other vanable costs, including hourly labor amount to $0.08 per page Read the requirements What is it under the new commission-based agreement? (Enter a "0" for any zero balances) 0 units The company's breakeven point under the new commission-based agreement is Requirement 2. For what range of sales levels will Direct prefer (a) the fixed lease agreement and (b) the commission agreement? In order to determine the range of sales levels Direct would prefer for each agreement we must first calculate the indifference point sales volume at which the income from alternative 1 equals the income from alternative The indifference point=2 Now calculate the indifference point (Round to the nearest whole number) The indifference point is at 24.000 units Direct would prefer the fixed lease agreement at sales more than the indifference point The commission based agreement would be preferred at Ounits up to the indifference point