1. OfficeCo supplies copying services for local companies, and wants to buy a ne
ID: 3354410 • Letter: 1
Question
1. OfficeCo supplies copying services for local companies, and wants to buy a new copy machine. Two different machines are considered, and each of these has a monthly lease cost plus a cost for each page that is copied. Machine #1 has a monthly lease cost of $760, and there is a cost of $0.025 per page copied. Machine #2 has a monthly lease cost of $540, and there is a cost of $0.033 per page copied. Customers are charged $0.057 per page for copies a) What is the break-even point for each machine? b) If OfficeCo expects to make 12,000 copies per month, what would be the total cost for each machine? c) At what volume (the number of copies) would the two machines have the same monthly hat would the total reverExplanation / Answer
a) break even cost for machine #1 =fixed cost/margin =760/(0.057-0.025) =23750 Copies
break even cost for machine #2 =fixed cost/margin =540/(0.057-0.033) =22500 Copies
b)
total cost for machine #1 =lease cost +copying cost =760+12000*0.025=1060
total cost for machine #2 =lease cost +copying cost =540+12000*0.033=936
c)
for let at x copies ; cost is same
therefore 760+0.025x =540+0.033x
x =27500
total revenue =0.057*27500 =1567.5
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