18.

The Cupcake Factory plans to open a new retail store in Austin, Texas. 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 1. If the Cupcake Factory plans to sell 3,400 cupcakes a month, which lease option would cost less each month? Why? 2. If the company plans to sell 5,200 cupcakes a month, which lease option would be more attractive? Why? Requirement 1. If the Cupcake Factory plans to sell 3,400 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) FC (option 1) = FC (option 2) (VCU (option 1) x Units) = (VCU (option 2) x Units) (VCU (option 1) x Units) + FC (option 1) = (VCU (option 2) x Units) + FC (option 2) (VCU (option 1) x Units) + FC (option 1) = FC (option 2)