What to submit: Excel file containing the model and the answer You are thinking

Question

What to submit: Excel file containing the model and the answer You are thinking of opening a small copy shop. It costs $5000 to rent a copier for a year, and it costs $0.03 per copy to operate the copier. Other fixed costs of running the store will amount to $400 per month. You plan to charge an average of $0.10 per copy, and the store will be open 365 days per year. Each copier can make up to 100,000 copies per year. For one to five copiers rented and daily demands of 500, 1000,1500, and 2000 copies per day, find annual profit. That is, find annual profit for each of these combinations of copiers rented and daity demand. [Use Data-Table] b. If you rent three copiers, what daily demand for copies will allow you to break even?

Explanation / Answer

a) Case 1 Case 2 Case 3 Case 4 Daily Demand                  500              1,000              1,500              2,000 Annual Demand        1,82,500        3,65,000        5,47,500        7,30,000 Revenue @ 0.10            18,250            36,500            54,750            73,000 Less:- Copy cost @ 0.03              5,475            10,950            16,425            21,900 Less:- Rent for 5 copier            25,000            25,000            25,000            25,000 Less:- Store Operating Cost @ 400 per month              4,800              4,800              4,800              4,800 Net Income/(loss)          -17,025             -4,250              8,525            21,300 B) if there is three copier than , Annual BEP demand will be Contribution per unit = $ 0.1-$ 0.03 = $ 0.07 per copy Fixed Cost Rent for 3 copier 15000 Operating Cost 4800 Total Fixed Cost 19800 No of copies needs to be sold for BEP = 19800/0.07 = 282857

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