FastQ Company,a specialist in printing,has established 500 convenience copying centers throughout the country.In order to upgrade its services,the company is considering three new models of laser copying machines for use in producing high-quality copies.These high-quality copies would be added to the growing list of products offered in the FastQ shops.The selling price to the customer for each laser copy would be the same,no matter which machine is installed in the shop.The three models of laser copying machines under consideration are 1024S,a small-volume model,1024M,a medium volume model,and 1024G,a large-volume model.The annual rental costs and the variable operating costs vary with the size of the machine.The machine capacities and costs are shown below

Question

Quizplus · Accepted Answer

Required:
(1)Determine the volume level in copies where FastQ Company would be indifferent between acquiring either the small-volume model laser copier (1024S)or the medium volume model laser copier (1024M).
(2)The management of FastQ Company is able to estimate the number of copies to be sold at each establishment.Present an analysis that would enable FastQ Company to select the most profitable machine without having to make a separate cost calculation for each establishment.(CMA Adapted)
Please see Feedback for answers.
 Feedback: (1)FastQ Company would be indifferent to acquiring either the small volume copier,1024S,or the medium volume copier,1024M,at the point where the costs for 1024S and 1024M are equal.This point may be calculated using the following formula where X equals the number of copies. 11ea6e70_bcc7_1f00_8f54_67dd18f74a9e_TB1699_00 The conclusion is that FastQ Company would be indifferent to acquiring either the 1024S or 1024M machine at an annual volume of 60,000 copies.
(2)A decision rule for selecting the most profitable copier,when the volume can be estimated,would establish the points where FastQ Company is indifferent to each machine.The volume where the costs are equal between alternatives can be calculated using the following formula where X equals the number of copies.For the 1024S machine compared to the 1024M machine: 11ea6e70_bcc7_1f01_8f54_8533a99aa829_TB1699_00 For the 1024M machine compared to the 1024G machine 11ea6e70_bcc7_1f02_8f54_493f40423c0a_TB1699_00 When the alternatives are compared,the decision rule is to select the alternative at the level as shown in the chart below. 11ea6e70_bcc7_4613_8f54_ab8a2e7e2e55_TB1699_00

FastQ Company,a Specialist in Printing,has Established 500 Convenience Copying Centers