Problem: The EBC Medical Center uses a normal costing system to develop its annual budget. EBC operates it own copy shop to handle large scale photocopying and reproduction jobs. For the upcoming twelve months, the copy shop assumes the following:
Fixed costs = $175,000
Variable costs = $0.07 per page
Expected volume = 925,000 pages
Q1. Calculate the total expected costs for the copy shop.
Q2. Using pages as the base, calculate the Normal Application Rate.
Q3. In preparing the budget for the Public Relations Department, it is assumed that the department will have 77,500 pages of work for the copy shop. How much should the department be budgeted for copying?
Q4. The office manager of the PR department is shocked at how much they will have to pay for copying. He has decided that his department will use Kinkos for all of its 77,500 copies. He has worked out an agreement with Kinkos to pay a flat annual fee of $15,000 plus $0.10 per page. How much in savings or additional costs to EBC has the manager of the PR Department generated?