Zoe Garcia Is The Manager Of A Small Office Support Business ✓ Solved
Zoe Garcia Is The Manager Of A Small Office Support Business
Zoe Garcia is the manager of a small office-support business that supplies copying, binding, and other services for local companies. Zoe must replace a worn-out copy machine that is used for black-and-white copying. Two machines are being 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 $600, and there is a cost of $0.010 per page copied. Machine 2 has a monthly lease cost of $400, and there is a cost of $0.015 per page copied. Customers are charged $0.05 per page for copies.
a. What is the break-even point for each machine?
b. If Zoe expects to make 20,000 copies per month, what would be the cost for each machine?
c. If Zoe expects to make 50,000 copies per month, what would be the cost for each machine?
d. At what volume (the number of copies) would the two machines have the same monthly cost? What would the total revenue be for this number of copies?
Although this is a working paper, it is also a research paper; therefore, it should be developed, organized and presented using APA formatting guidelines – including the use of a title page, citations, headings, tables, figures, references and appendices (if applicable); be sure to cite at least three scholarly researched sources. Any calculations and graphs may be done in Excel, and then transferred to a Word document. All calculations should be clearly explained as to your assumptions and how you arrived at your answers. Neither an abstract or running head is necessary for this assignment.
Paper For Above Instructions
In this analysis, we will evaluate the cost implications of two different copying machines considered by Zoe Garcia for her office support business. Our approach will include a calculation of the break-even point for each machine, costs based on expected monthly copies, and determining a volume threshold where both machines’ total costs are equal. Additionally, we will assess the projected total revenue associated with that volume.
Break-even Point Calculation
The break-even point is defined as the number of copies where total costs equal total revenue. Below are the cost structures for both machines:
- Machine 1: Monthly Lease Cost = $600, Cost per Page = $0.010
- Machine 2: Monthly Lease Cost = $400, Cost per Page = $0.015
The total cost can be expressed as:
Total Cost = Monthly Lease Cost + (Cost per Page × Number of Copies)
Setting the total revenue from copies equal to costs, we have:
Total Revenue = Price per Page × Number of Copies
Given that the price per page is $0.05, the revenue equation becomes:
Revenue = $0.05 × Number of Copies
For Machine 1:
Set up the break-even equation:
600 + 0.010x = 0.05x
Solving this gives:
600 = 0.05x - 0.010x
600 = 0.04x
x = 600 / 0.04 = 15,000 copies
For Machine 2:
Set up the break-even equation:
400 + 0.015x = 0.05x
Solving this gives:
400 = 0.05x - 0.015x
400 = 0.035x
x = 400 / 0.035 ≈ 11,429 copies
Cost for 20,000 Copies
Now, we will compute the total cost for each machine assuming Zoe expects to make 20,000 copies monthly:
Machine 1 Cost:
Total Cost = 600 + (0.010 × 20,000) = 600 + 200 = $800
Machine 2 Cost:
Total Cost = 400 + (0.015 × 20,000) = 400 + 300 = $700
Cost for 50,000 Copies
Next, we calculate the total cost for each machine assuming 50,000 copies are made monthly:
Machine 1 Cost:
Total Cost = 600 + (0.010 × 50,000) = 600 + 500 = $1,100
Machine 2 Cost:
Total Cost = 400 + (0.015 × 50,000) = 400 + 750 = $1,150
Equal Cost Volume Calculation
Next, we determine at what volume the costs of both machines will be equal:
Set the equations equal:
600 + 0.010x = 400 + 0.015x
Rearranging gives:
600 - 400 = 0.015x - 0.010x
200 = 0.005x
x = 200 / 0.005 = 40,000 copies
Total Revenue at 40,000 Copies
To find the total revenue for this volume:
Total Revenue = 0.05 × 40,000 = $2,000
Conclusion
In summary, the break-even points are discovered to be at 15,000 copies for Machine 1, and 11,429 copies for Machine 2. The costs for projected copies of 20,000 and 50,000 were calculated as $800 and $1,100 for Machine 1 and $700 and $1,150 for Machine 2 respectively. Finally, the machines’ costs become equal at a production volume of 40,000 copies, generating total revenue of $2,000.
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