Allocating costs in a service business Betty Chung plans to open a photography studio in a shopping mall. She plans to specialize in children's photography. She expects the average revenue from each sale to be $25 and the average cost per sale of photographic supplies used in taking and developing the portraits to be $12 per sale. The shop rent at the mall is $600 per month plus five percent of sales revenue. All utility costs are included in the rent. In addition to the shop rent Betty has signed a one year agreement to use a local advertising agency to promote her business. The cost of this service is $250 per month. Betty expects to sell 125 children's portraits per month, but she thinks the sales level could vary between 80 and 150 portraits per month.

REQUIRED

a. If Betty's expected sales level is achieved, what is the cost per sale of the monthly fixed costs?

b. Compute the cost per sale of the monthly fixed costs if the lowest level of sales is achieved, and also if the highest level of sales is achieved.

c. Compute the total rent cost if the highest level of sales is achieved.

d. If Betty sells 140 portraits per month, what will be her monthly profit?