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Cost Accounting - Choosing a Text Plan...create a graph

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You are on a tight budget and need to decide between the following 3 texting plans:

Plan A: Pay $0.10 per text

Plan B: Pay a fixed monthly fee of $15 for up to 500 texts per month and $0.08 for each text over the 500.

Plan C: Pay a fixed monthly fee of $25 for up to 1,000 texts per month and $0.05 for each text over the 1,000.

Requirements

a) Draw a graph of the total monthly cost of the three plans for different levels of texting.

b) Which plan should you choose if you expect to make:

-- 240 texts per month?
-- 780 texts per month?
-- 1,250 texts per month?

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Solution Summary

I did an analysis of cost of the three plans for each 50 texts from zero to 1,700 per month (in Excel, see attached, click in cells to see computations). These are then graphed for you (scroll down below data to see graph in Excel). The lines closest to activity levels requested are highlighted so you can see the cheaper plan.

Solution Preview

b) Which plan should you choose if you expect to make:

-- 240 texts per month? Plan B

-- 780 texts per month? ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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