Answer:
Instructions are listed below.
Explanation:
Giving the following information:
The first is to lease a high-end machine for $8,400/year.The only additional costs are the cost of paper, which is $0.01/sheet.
The other option is to purchase a machine. The cost is $5,000 and the per sheet cost increases (toner, maintenance) to $0.02.
First, we need to determine the total cost formula for each option:
Option 1:
Total cost= 8,400 + 0.01x
Option 2:
Total cost= 5,000 + 0.02x
A) Volume= 270,000
Option 1:
Total cost= 8,400 + 0.01*270,000= $11,100
Option 2:
Total cost= 5,000 + 0.02*270,000= $10,400
Option 2 is the cheapest.
B) Volume= 240,000
Option 1:
Total cost= 8,400 + 0.01*240,000= $10,800
Option 2:
Total cost= 5,000 + 0.02*240,000= $9,800
Option 2 is the cheapest.
C) To determine the indifference point, we need to isolate X:
8,400 + 0.01x= 5,000 + 0.02x
3,400= 0.01x
340,000=x
The indifference point is 340,000 paper sheets.
