You are the office manager for Dr. Rogers. The increasing
cost of making photocopies is a concern to Dr. Rogers. She wants to examine
alternatives to the current financing plan. The office currently leases a copy
machine for $110 per month and pays $0.025 per copy. A 3-year payment plan is
available that costs $125 per month and $0.015 per copy.
(a) If the office expects to run 100,000 copies per year, which is the better plan?
(b) How much money will the better plan save over the other plan?
Figure out how much each one would cost. Then you'll know what the better plan is and how much money they will save.
It tells you how much they're paying per month and it tells you how much they're paying per copy.
Matt
To determine which plan is better, we need to compare the total cost of each plan.
(a) Let's calculate the total cost for each plan over a year and compare them.
For the current plan:
Lease cost = $110 per month * 12 months = $1,320 per year
Cost per copy = $0.025 per copy * 100,000 copies = $2,500 per year
Total cost for the current plan = Lease cost + Cost per copy = $1,320 + $2,500 = $3,820 per year
For the 3-year payment plan:
Payment cost = $125 per month * 12 months = $1,500 per year
Cost per copy = $0.015 per copy * 100,000 copies = $1,500 per year
Total cost for the 3-year payment plan = Payment cost + Cost per copy = $1,500 + $1,500 = $3,000 per year
Comparing the total costs, the better plan would be the 3-year payment plan as it costs less per year.
(b) To calculate the savings of the better plan over the other plan, we subtract the total cost of the better plan from the total cost of the other plan.
Savings = Total cost of the current plan - Total cost of the 3-year payment plan
Savings = $3,820 - $3,000 = $820 per year
Therefore, the better plan would save the office $820 per year compared to the current plan.