Requirement 3. Graphic estimates that the company is equally likely to sell 20,000 30,000 40,000 50,000, , , , or 60,000 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?

Begin with the fixed leasing agreement. (Use parentheses or a minus sign for losses.)

Fixed leasing agreement

Expected

Sales level

Profit/(Loss)

Profit/(Loss)

20,000

30,000

40,000

50,000

60,000

Total expected profit/(loss)

Next, calculate the expected profit at each sales level under the commission based agreement.

Commission-based agreement

Expected

Sales level

Profit/(Loss)

Profit/(Loss)

20,000

30,000

40,000

50,000

60,000

Total expected profit/(loss)

Graphic should choose (1) agreement.

1: 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 20,000 30,000 40,000 50,000, , , , or 60,000 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?

(1) neither

the fixed lease the commission-based