Solve the Following Problem Using the Contribution Margin Approach

Short Answer

Solve the following problem using the Contribution Margin Approach.
Huntsville Office Supplies (HOS) is evaluating the profitability of leasing a photocopier for its customers to use on a self-serve basis at 10′ per copy. The copier may be leased for $300 per month plus 1.5′ per copy on a full-service contract. HOS can purchase paper at $5 per 500-sheet ream. Toner costs $100 per bottle, which in normal use will last for 5000 pages. HOS is allowing for additional costs (including electricity) of 0.5′ per copy.
a) How many copies per month must be sold in order to break even?
b) What will be the increase in monthly profit for each 1000 copies sold above the break-even point?