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Question 5 Blueline Printing Company currently leases its only copy machine for $1,100 a month. The...

Question 5 Blueline Printing Company currently leases its only copy machine for $1,100 a month. The company is considering replacing this leasing agreement with a new contract that is entirely commission based. Under the new​ agreement, Blueline would pay a commission for its printing at a rate of $10 for every 500 pages printed. The company currently charges ​$0.32 per page to its customers. The paper used in printing costs the company $0.09 per page and other variable​ costs, including hourly​ labor, amount to $0.12 per page.

(PLEASE USE EXCEL FOR THE ANSWERS)

Read the 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 Blueline prefer​ (a) the fixed lease agreement and​ (b) the commission​ agreement?

3.

Blueline estimates that the company is equally likely to sell 24,000​, 34,000​, 44,000​,

54,000​, or 64,000 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 Blueline ​choose?

Requirement 1. What is the​ company's breakeven point under the current leasing​ agreement? What is it under the new​ commission-based agreement?

​First, determine the formula used to calculate the breakeven point in​ units, then calculate the​ company's breakeven point under the current leasing agreement. ​(Enter a​ "0" for any zero​ balances.)

Fixed Cost

÷

Contribution per unit

=

Breakeven number of units

÷

=

Solutions

Expert Solution


ekkarill92 answered 2 years ago
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