How many calendars would the company need to sell if the total profits from each option are to be equal?

Question

"After exploring both options, we have determined that the quality and deliverability time will be identical in each case. Calendars will sell for €15 each. Printing calenders though a 3rd party will cost €11 per calendar. Purchasing a facility will cost €100,000 including all one-time expenses.

Costs of printing in house are:

·        Ink €0.30 per page

·        Paper €0.10 per page

·        Binding €2.00

·        Each calendar has 1 binding and 15 pages, each with a photo

·        Labor costs are €1.00 per calendar

How many calendars would the company need to sell if the total profits from each option are to be equal?"

Answer 1

This question seems overwhelming so lets breakdown but we just need to breakdown how much cost is associated with in-house making of a Calendar:

1. you have a 1 time cost of 100,000
2. each Calendar needs ink (.30), binding (2.00), 15 pages (15*.10), and labor (1.00) = 4.80 per paper

Now we can solve for the equation of Revenue - Cost = Profit (number of Calendars I will call C)

So lets set the profit using the 3rd party = to the profit of making Calendars in-house:

15C-11C=15C-4.8C-100000, 4C=10.2C-100000, 100000=6.2C, 100000/6.2=C=16129.03 (round up) 16,130 Calendars