Composite Printing Company currently leases its only copy machine for $ 1,500 a

Question

Composite Printing Company currently leases its only copy machine for $ 1,500 a month. The company is considering replacing this leasing agreement with a new contract that is entirely commission based. Under the new agreement. Composite would pay a commission for its printing at a rate of $ 10 for every 500 pages printed. the company currently charges $ 0.25 per page ot its customers. The paper used in printing costs the company $ 0.06 per page and other variable costs, including hourly labor amounting to $0.09 per page. Read the requirements.

Explanation / Answer

a Pages Sold Revenure per page Total Revenue Variable Cost per page $(.06+.09) Total variable Cost Fixed Cost Operating Income Probability Expected Opearting Income 37500 0.25 9375 0.15 5625 1500 2250 0.3334 750.15 47500 0.25 11875 0.15 7125 1500 3250 0.3333 1083.23 57500 0.25 14375 0.15 8625 1500 4250 0.3333 1416.53 Total 9750 3249.90 3245.00 b rounded off Commission based Commission Base extra variable cost $10/500 0.02 Pages Sold Revenure per page Total Revenue Variable Cost per page $(.06+.09+.02) Total variable Cost Fixed Cost Operating Income Probability Expected Opearting Income 17500 0.25 4375 0.17 2975 0 1400 0.2 280.00 27500 0.25 6875 0.17 4675 0 2200 0.2 440.00 37500 0.25 9375 0.17 6375 0 3000 0.2 600.00 47500 0.25 11875 0.17 8075 0 3800 0.2 760.00 57500 0.25 14375 0.17 9775 0 4600 0.2 920.00 Total 11400 3000 In the above case it should usethe current agreement. But I think 17500 and 27500 pages should also be added in the solution for proper comparison so refer below Note I think for original data 17500 and 27500 are also there in the question as this might be missing in the image if that is the case the original data calculation will be as follows Pages Sold Revenure per page Total Revenue Variable Cost per page $(.06+.09) Total variable Cost Fixed Cost Operating Income Probability Expected Opearting Income 17500 0.25 4375 0.15 2625 1500 250 0.2 50.00 27500 0.25 6875 0.15 4125 1500 1250 0.2 250.00 37500 0.25 9375 0.15 5625 1500 2250 0.2 450.00 47500 0.25 11875 0.15 7125 1500 3250 0.2 650.00 57500 0.25 14375 0.15 8625 1500 4250 0.2 850.00 Total 9750 2250 In this case commission based agreement If you get confused by what I am saying. Please comment I will clarify it

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