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What is Jaclyn’s new break-even point? If she sells 264 bubble teas, which option does she prefer?

What is Jaclyn’s new break-even point? If she sells 264 bubble teas, which option does she prefer?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Jaclyn is considering opening a location on campus to sell bubble tea. Her rent would be $500/month and she expects to sell each drink for $5. Variable costs are $0.85 and labor is $1.77. She also has the option to share space with a friend, which would cost her only $300/month in rent. Her friend wants $0.03 per bubble tea revenue sharing.

What is Jaclyn’s new break-even point? If she sells 264 bubble teas, which option does she prefer?

 

a. She prefers sharing space with her friend at Q=264.

b. She is indifferent between the two choices at Q=264.

c. She prefers working by herself at Q=264.

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