## Question

# David Willis is considering opening a new copy shop near a large university. If he does, he'll rent six machines for $1,200 a month each.

David Willis is considering opening a new copy shop near a large university. If he does, he'll rent six machines for $1,200 a month each. Rent, utilities, and salaries will total $2,000 per month. David's cost of paper and ink is $0.01 per copy, and he plans to charge $0.05 per copy. a) What is his break-even point? (230,000 copies per month)

b) Suppose David thinks he can get by with only four machines. How much will his break-even point be? (170,000 copies per month)

c) Suppose that David rents four machines and sells 200,000 copies in a month. What is his NOI for that month? (NOI=$1,200)

d) David is considering placing an ad for $200 in the student newspaper with a coupon of 0, $04 per copy for orders of 50 copies or more. She estimates that if she runs the ad, she will sell 250,000 copies and that approximately 50% of her customers will use the coupon. If you place the ad, what will your breakeven point and NOI be? (200,000 issues per month and NOI=$1,750)

## Step by Step Solution

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a The breakeven point is the point at which total revenue equals total cost Let x be the number of c...### Get Instant Access to Expert-Tailored Solutions

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