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Homework answers / question archive / Question 5 Blueline Printing Company currently leases its only copy machine for $1,100 a month

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

Accounting

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
 

÷

  

=

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