For the items 3-4:
Jelly Bibi has just opened its doors. The new retail store sells refurbished computers at a significant discount from market
prices. The computers cost Jelly Bibi $100 to purchase and require 10 hours of labor at $15 per hour. Additional variable costs,
including wages for sales personnel, are $50 per computer. The newly refurbished computers are resold to customers for $500.
Rent on the retail store costs the company $4,000 per month.
Selling price
$ 3,000
Variable cost per engine
$ 500
Annual fixed costs
$3,000,000
Net income
$1,500,000
Income tax rate
25%
3. Jelly Bibi can purchase already refurbished computers for $200. This would mean that all labor required to refurbish the
computers could be eliminated. What would Jelly Bibi’s new breakeven point be if it decided to purchase the computers already
refurbished?
4. Instead of paying the monthly rental fee for the retail space, Jelly Bibi has the option of paying its landlord a 20% commission
on sales. Assuming the original facts in the problem, at what sales level would Jelly Bibi be indifferent between paying a fixed
amount of monthly rent and paying a 20% commission on sales?