The company's breakoven point under the new commission based agreement is 0 units Requirement 2. For what range of sales levels will Direct prefer (a) the foxed loase agreement and (b) the commission agreement? In order to determine the range of sales tevels Direct would prefer for each agreement, we must first calculate the indifference point, The indifference point = sales volume at which the income from alternative 1 equals the income from alternative 2. Now calculate the indifference point. (Round to the nearest whole number) The indiference point is at units For Current Leasing Agreement :- Break Even Units = Fixed Costs/( Selling price per unit - Variable cost per unit) = 1200/ (0.23 -0.13) = 1200 / 0.1 = 12000 pages For New Commission based agreement :- As the commission is upon no. of papers sold , so it's a variable expense. So fixed expense would be 0. Break Even Units = Fixed Costs/( Selling price per unit - Variable cost per unit) = 0/(0.23 -0.18) = 0 Variable cost = 0.08 +0.05 + ( $25 / 500 page ) = 0.18 page Question 4: P3-45 (similar to) Direct Printing Company currently leases its only copy machine for $1200 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 ir printing costs the company $0.05 per page and other variable costs, including hourly labor, amount to $0.08 per page. Read the requirements