Purchase Solution

costs and revenues

Not what you're looking for?

Ask Custom Question

3. You have opened your own word-processing service. You bought a personal computer, and paid $5,000 for it. However, due to the cost changes in the computer industry, the current price of an equivalent machine is $2,500. You could sell any used machine for $1,000. If you were not word processing, you could earn $20,000 per year at an alternative job. Assume that the interest rate is 10%. You can also hire an assistant who can do everything that you can do for $20,000 per year (you would still continue to do word processing).
One person using one computer can produce 11,000 typed pages per year, and the price per page for your service is $2.

You are considering three options:
(1) expand your business by hiring an assistant.
(2) leave your business the way it is
(3) shut down.

Based on the costs and revenues above, which should you do? Explain and show any relevant calculations

Purchase this Solution
Solution Summary

The costs and revenues are articulated.

Solution Preview

Now let us consider the incremental revenues and costs associated with each of the three options:

1) Expand the business by hiring an assistant:
Price per page of service = $2.00
No. of pages per year = 11000
Incremental Revenues = Price per page of service * No. of ...

Purchase this Solution
Free BrainMass Quizzes
Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

View More Free Quizzes
Related BrainMass Solutions

  • Finding the Break-even Point in Sales Dollars

    this answer, we can compute the net income at $4,000,000 in sales: Sales revenues-Variable costs-Fixed costs=Net income Contribution margin=Sales revenues-variable costs Contribution Margin Ratio=(Sales revenues-Variable costs)/Sales revenues Contribution

  • Contribution Margin

    , manufacturing support costs, total manufacturing costs, flexible (varible) costs, and capacity-related (fixed )costs.

  • Revenue, fixed costs, variable costs and contribution margin

    This is because total costs remain the same, if selling price reduce, more output will be required to generate the same level of revenues as earlier, and breakeven is where total revenues is equal to total costs.

  • discuss how Halliburton prices its revenues and costs

    66535 In terms of currency denomination, discuss how Halliburton prices its revenues and costs. In terms of currency denomination, discuss how Halliuburton prices its revenues and costs.

  • Incremental Analysis - Revenues, Costs and Net Income

    497397 Incremental Analysis - Revenues, Costs and Net Income Ming Company is considering two alternatives. Alternative A will have sales of $150,000 and costs of $100,000. Alternative B will have sales of $180,000 and costs of $120,000.

  • Calculating the firm's net income

    The company's costs (excluding depreciation and amortization) amounted to 75% of revenues, and Art's boutique had interest expenses of $40,000 and depreciation of 60,000. What is the firm's net income if the tax rate was 34 percent?

  • Break-even Analysis

    Variable costs will become 35% + 20% = 55% of revenues. The fixed costs will change from $1,000,000 to $1,000,000 - $480,000 = $520,000. The breakeven point (revenues) will be $520,000/0.45 = $1,155,556.

  • Joint costs

    in relation to further processing and joint costs.

  • Recognition of film and television costs

    Film and Television Revenues and Costs We expense film and television production and participation costs over the applicable product life cycle based upon the ratio of the current period's gross revenues to the estimated remaining total gross revenues

  • Price elasticity of demad, determinants of elasticity

    A firm with total revenues of $250,000, explicit costs of $275,000, and implicit costs of $50,000 Accounting Profit=Total Revenues - Explicit costs=250000-275000=-$25000 Economic profit=Total Revenues-Explicit costs-Implicit costs=250000-275000-

View More Related Solutions