Ray Smith, a gift basket retailer, has stores in three shopping centres. The average selling price of a decorated gift basket is $60, and the average cost of each sale is $36. A new shopping centre is opening where Ray wants to open a store, but he is not sure which rental option he should choose. The landlord has offered three options for the new store: 1. paying a fixed rent of $20,000 a month, or 2. paying a base rent of $14,500 a month plus 8% of monthly revenue received, or 3. paying a base rent of $7,200 plus 14% of revenue received up to a maximum rent of $30,000. Required: For each option, compute the breakeven sales and the monthly rent paid at break-even.

Ray Smith, a gift basket retailer, has stores in three shopping centres. The average selling price of a decorated gift basket is $60, and the average cost of each sale is $36. A new shopping centre is opening where Ray wants to open a store, but he is not sure which rental option he should choose. The landlord has offered three options for the new store: 1. paying a fixed rent of $20,000 a month, or 2. paying a base rent of $14,500 a month plus 8% of monthly revenue received, or 3. paying a base rent of $7,200 plus 14% of revenue received up to a maximum rent of $30,000. Required: For each option, compute the breakeven sales and the monthly rent paid at break-even.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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