An online commercial directory service must decide between composing the ads for its clients inhouse or paying a production company to compose them. To develop the ads in-house, the company will have to purchase computers, printers, and a database management system at an estimated cost of $42,000. This equipment will have a useful life of 3 years, after which it will be sold for $2000. The employee who creates the ads will be paid $55,000 per year. In addition, each ad will have an average cost of $10. Alternatively, the company can outsource development at a flat fee of $21 per ad. At an interest rate of 10% per year, how many ads must the company sell each year for the options to just break even?
An online commercial directory service must decide
between composing the ads for its clients inhouse
or paying a production company to compose
them. To develop the ads in-house, the company
will have to purchase computers, printers, and a
database management system at an estimated cost
of $42,000. This equipment will have a useful life
of 3 years, after which it will be sold for $2000.
The employee who creates the ads will be paid
$55,000 per year. In addition, each ad will have an
average cost of $10. Alternatively, the company
can outsource development at a flat fee of $21 per
ad. At an interest rate of 10% per year, how many
ads must the company sell each year for the options
to just break even?
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