A Yellow Pages Directory company mustdecide whether to compose their own ads or

Question

A Yellow Pages Directory company mustdecide whether to compose their own ads or pay an outside firm todo them.They can buy them outside for $21.00 per ad. If they chooseto do them insidethey will have to do the following two things:1)Buy computer hardware for $12,000 This equipment will last 3years and have a salvage value of $2,000. 2)Hire an employee at anannual cost of $45,000 per year. In addition to the two new fixedcosts there will also be a $4.00 per ad variable cost if theychoose to prepare their own ads. At 10% interest rate how many adsdo they need to do annually to break even if they decide to preparethe ads themselvces 1,895 ads peryear 2,895 ads peryear 3,595 ads peryear 3,895 ads peryear

Explanation / Answer

let x be the number of ads : cost per year of computer 12000-2000=1000/3=3333.33 : interest for a year 10%=10000*.10=833 : 21x=45000+3333+1200+4x :
17x=49166 :
x=2892 :
so 2895 ads per year

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