Cupcake World Factory plans to open a new retail store in St. Louis, Missouri. The store will sell specialty cupcakes for $6 per cupcake (each cupcake has a varial store. The landlord has offered two leasing options: 1) a lease of $2,000 per month; or 2) a monthly lease cost of $800 plus 5% of the company's monthly sales rev uirements If the Cupcake World Factory plans to sell 3,000 cupcakes a month, which lease option would cost less each month? Why? If the company plans to sell 5,500 cupcakes a month, which lease option would be more attractive? Why? uirement 1. If the Cupcake World Factory plans to sell 3,000 cupcakes a month, which lease option would cost less each month? Why? n by calculating the indifference point. Select the equation to determine the indifference point. (Abbreviations used: FC = Fixed costs, VCU = Variable costs per uni (VCU (option 1) × Units) + FC (option 1) = (VCU (option 2) × Units) + FC (option 2)
Cupcake World Factory plans to open a new retail store in St. Louis, Missouri. The store will sell specialty cupcakes for $6 per cupcake (each cupcake has a varial store. The landlord has offered two leasing options: 1) a lease of $2,000 per month; or 2) a monthly lease cost of $800 plus 5% of the company's monthly sales rev uirements If the Cupcake World Factory plans to sell 3,000 cupcakes a month, which lease option would cost less each month? Why? If the company plans to sell 5,500 cupcakes a month, which lease option would be more attractive? Why? uirement 1. If the Cupcake World Factory plans to sell 3,000 cupcakes a month, which lease option would cost less each month? Why? n by calculating the indifference point. Select the equation to determine the indifference point. (Abbreviations used: FC = Fixed costs, VCU = Variable costs per uni (VCU (option 1) × Units) + FC (option 1) = (VCU (option 2) × Units) + FC (option 2)
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 6P
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Question
![The Cupcake World Factory plans to open a new retail store in St. Louis, Missouri. The store will sell specialty cupcakes for $6 per cupcake (each cupcake has a variable cost of $3.) The company is negotiating its lease for the
new store. The landlord has offered two leasing options: 1) a lease of $2,000 per month; or 2) a monthly lease cost of $800 plus 5% of the company's monthly sales revenue.
Requirements
If the Cupcake World Factory plans to sell 3,000 cupcakes a month, which lease option would cost less each month? Why?
If the company plans to sell 5,500 cupcakes a month, which lease option would be more attractive? Why?
1.
2.
←
Requirement 1. If the Cupcake World Factory plans to sell 3,000 cupcakes a month, which lease option would cost less each month? Why?
Begin by calculating the indifference point. Select the equation to determine the indifference point. (Abbreviations used: FC = Fixed costs, VCU = Variable costs per unit)
(VCU (option 1) × Units) + FC (option 1) = (VCU (option 2) × Units) + FC (option 2)
The indifference point (in number of cupcakes) is](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2f9a0e10-3d09-4c10-bf38-615d58d7273e%2F525d2fb9-c64f-4a29-82e8-74d8ab164533%2Fhyxhuuj_processed.png&w=3840&q=75)
Transcribed Image Text:The Cupcake World Factory plans to open a new retail store in St. Louis, Missouri. The store will sell specialty cupcakes for $6 per cupcake (each cupcake has a variable cost of $3.) The company is negotiating its lease for the
new store. The landlord has offered two leasing options: 1) a lease of $2,000 per month; or 2) a monthly lease cost of $800 plus 5% of the company's monthly sales revenue.
Requirements
If the Cupcake World Factory plans to sell 3,000 cupcakes a month, which lease option would cost less each month? Why?
If the company plans to sell 5,500 cupcakes a month, which lease option would be more attractive? Why?
1.
2.
←
Requirement 1. If the Cupcake World Factory plans to sell 3,000 cupcakes a month, which lease option would cost less each month? Why?
Begin by calculating the indifference point. Select the equation to determine the indifference point. (Abbreviations used: FC = Fixed costs, VCU = Variable costs per unit)
(VCU (option 1) × Units) + FC (option 1) = (VCU (option 2) × Units) + FC (option 2)
The indifference point (in number of cupcakes) is
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