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Can you help with Option 1 and 2 and I can figure out Option 3? Problem 2: Changing Cost Structures (28 points) Karen Hefner, a
Can you help with Option 1 and 2 and I can figure out Option 3?
Problem 2: Changing Cost Structures (28 points) Karen Hefner, a florist, operates retail stores in several shopping malls. The average selling price of an arrangement is $30 and the average cost of each sale is $18. She also pays a manager $5,000 per month. A new mall is opening where Karen wants to locate a store, but the location manager is not sure about the rent method to accept. The mall operator offers the following three options for its retail store rentals: 1. paying a fixed rent of $15,000 a month, or 2. paying a base rent of $9,000 plus 10% of revenue received, or 3. paying a base rent of $4,800 plus 20% of revenue received Required: Determine the selling price per unit, variable cost per unit and total fixed costs for each option. Calculate the break-even in units under each option. Calculate the net income under each option assuming that units sold are 5,000. Which option should Karen choose? Support your answer. Option 1 Option 2 Option 3 Selling Price Per Unit Variable Cost Per Unit Total Fixed Costs Break-Even in Units Net IncomeStep by Step Solution
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