Amy Leclair and Laura Lefaive want to open a snowboard rental store. The season is expected to be 20 weeks (a great season could mean 21 weeks; a bad season could mean just 18 weeks). They expect to have an 80% rental rate. The following analysis for the potential new venture was recently prepared:

Fixed Costs

Store rent $ 5,000

Snowboards (40 @ $300) 12,000

All other fixed costs (Salaries, advertising, office expense) 26,000

Total:$43,000

Contribution margin per board per year: $43,000

Revenue per week $75

Refurbishing cost (7)

Contribution margin per board per week $68

number of weeks 20

Seasonal contribution margin from 100% rental $1,360

likelihood of rental 80%

Expected seasonal contribution margin per board $1,088

Break-even number of boards ($43,000 $1,088) 39.5

Ms. Leclair perused the analysis and said "Look at the numbers. We can't do this!". Ms. Lefaive looked at it and claimed, "I have looked seriously at the numbers....we absolutely should so this !".

How can the two partners have such different interpretations of the same information? What might each have been focusing on when they made their respective statements? Now assume that they have come to you to provide an honest opinion - whoever is wrong is willing to listen. What would you tell them? Support your response with the appropriate facts and figures.