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Bristol Printing Company currently leases its only copy machine for $1,400 a month. The company...

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Question

Accounting

Bristol

Printing Company currently leases its only copy machine for

$1,400

a month. The company is considering replacing this leasing agreement with a new contract that is entirely commission based. Under the new agreement,

Bristol

would pay a commission for its printing at a rate of

$20

for every 500 pages printed. The company currently charges

$0.29

per page to its customers. The paper used in printing costs the company

$0.11

per page and other variable costs, including hourly labor, amount to

$0.13

per page.

Requirement 3.

Bristol

estimates that the company is equally likely to sell

30,000,

40,000,

50,000,

60,000,

or

70,000

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

Bristol

choose?

Begin with the fixed leasing agreement. (Use parentheses or a minus sign for losses.)

Fixed leasing agreement

Expected

Sales level

Profit/(Loss)

Profit/(Loss)

30,000

40,000

50,000

60,000

70,000

Total expected profit/(loss)

Answer & Explanation Solved by verified expert
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