Question

III. Karen operates retail stores in several shopping malls. The average selling price of an arrangement is $30 and the average cost of each sale is $18. A new mall is opening where Karen wants to locate a store, but the location manager is not sure about the rent method to accept. The mall operator offers the following three options for its retail store rentals: 1. paying a fixed rent of $15,000 a month, or 2. paying a base rent of $9,000 plus 10% of revenue received, or 3. paying a base rent of $4,800 plus 20% of revenue received up to a maximum rent of $25,000. Required: a. For each option, compute the breakeven sales and the monthly rent paid at break-even. b. Beginning at zero sales, show the sales levels at which each option is preferable up to 5,000 units.

I need detail answer on question b

Answer 1

SOLUTION-B) From 0 to 1,400 units for $4,800 + S6 per unit - Option 3 From 1,401 to 2,000 for $9,000 plus $3 per unit - Option 2 Above 2,000 for $15,000- Option 1 The Option 1 equals Option 2 if sales are 2,000 and Option 1 is favored above 2,000 units $15,000 $9,000 + (0.10 S30N) $6,000 3N It gives N 2,000 The Option 1 equals Option 3 if sales are 1,700 and favors Option 1 above 1,700 units $15,000 $4,800 + (0.20 S30N) $10,200 S6N It gives N 1,700 units