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## A couple of entrepreneurial business

A couple of entrepreneurial business students at State University decided to put their education into practice by developing a tutoring company for business students. While private tutoring was offered, it was determined that group tutoring before tests in the large statistics classes would be most beneficial. The students rented a room close to campus for \$300 for 3 hours. They developed handouts based on past tests, and these handouts (including color graphs) cost \$5 each. The tutor was paid \$25 per hour, for a total of \$75 for each tutoring session.

If students are charged \$20 to attend the session, how many students must enroll for the company to break even?
A somewhat smaller room is available for \$200 for 3 hours. The company is considering this possibility. How would this affect the break-even point.

1-25

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.

What is the break-even point for each machine?
If Zoe expects to make 10,000 copies per month, what would be the cost for each machine?
If Zoe expects to make 30,000 copies per month, what would be the cost for each machine?
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?

1-26

Bismarck Manufacturing intends to increase capacity through the addition of new equipment. Two vendors have presented proposals. The fixed cost for proposal A is \$65,000 and for proposal B, \$34,000. The variable cost for A is \$10 and for B, \$14. The revenue generated by each unit is \$18.
What is the break-even point for each proposal?
If the expected volume is 8,300 units, which alternative should be chosen?