You own a shop that prints posters of animals, landscapes and current famous celebrities. Last year,...

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You own a shop that prints posters of animals, landscapes and current famous celebrities. Last year, you launched a new marketing campaign that you hoped would increase poster sales. It appears your marketing tactics are starting to pay off you are seeing a steady increase in demand, not only for gorgeous cities, beaches and the Grand Canyon, but also A-list celebrities like Flo from the Progressive commercials. The issue you now face is one of capacity and when/if to buy a second printer to increase your rated capacity. Printers are expensive and you're not sure if you'll see a return on your investment. Part 1 Using the cost, capacity, and revenue information below in Table 1 for both your current operation and your future operation (with the additional printer), answer questions 1-7. Table 1: Fixed cost: Variable cost per poster: Annual capacity: Sales price of each poster: Current $2,000 $4.50 3,500 posters $10.00 Future $3,200 $6.00 6,500 posters $10.00 1. What is the BEP for your current operation? 2. What is the BEP for your future operation if you decide to purchase the 2nd machine? 3. What is your current annual profit? 4. What is your future potential annual profit if you decide to purchase the second machine? 5. Should you buy the new machine? NOTE: For questions 3 and 4, assume you produce to capacity and sell all of the posters you produce. You own a shop that prints posters of animals, landscapes and current famous celebrities. Last year, you launched a new marketing campaign that you hoped would increase poster sales. It appears your marketing tactics are starting to pay off you are seeing a steady increase in demand, not only for gorgeous cities, beaches and the Grand Canyon, but also A-list celebrities like Flo from the Progressive commercials. The issue you now face is one of capacity and when/if to buy a second printer to increase your rated capacity. Printers are expensive and you're not sure if you'll see a return on your investment. Part 1 Using the cost, capacity, and revenue information below in Table 1 for both your current operation and your future operation (with the additional printer), answer questions 1-7. Table 1: Fixed cost: Variable cost per poster: Annual capacity: Sales price of each poster: Current $2,000 $4.50 3,500 posters $10.00 Future $3,200 $6.00 6,500 posters $10.00 1. What is the BEP for your current operation? 2. What is the BEP for your future operation if you decide to purchase the 2nd machine? 3. What is your current annual profit? 4. What is your future potential annual profit if you decide to purchase the second machine? 5. Should you buy the new machine? NOTE: For questions 3 and 4, assume you produce to capacity and sell all of the posters you produce.

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The calculations based on the information provided 1 BEP for current operation Fixed cos... View the full answer