Candle Creations plans to open a new retail store in Gardiner, Maine. The store will sell specialty candles for an average of $$30$ each.

View the average variable costs per candle.

The company is negotiating its lease for the new location.

View the two leasing options that the landlord has offered.

The company expects to sell approximately $400$ candles per month.

Read the requirements.

Requirement $1.$ Which lease option is more attractive for the company under its current sales expectations? Calculate the total lease cost under Option A and Option B$.$

Begin by identifying the formula to calculate the total costs.

Total fixed expenses $(lease),+,$ Total variable expenses $(lease),$ Total lease costs

$($Consider only the fixed and variable costs related to the lease options.$)$

The total lease cost under Option A is

$($Consider only the fixed and variable costs related to the lease options.$)$

The total lease cost under Option B is

Which lease option is more attractive for the company under its current sales expectations?

Requirement $2.$ At what level of sales $($in units$)$ would the company be indifferent between the two lease options? Show your proof.

Begin by selecting the equation to determine the indifference point. $($Abbreviations used: FC $=$ Fixed costs, VCU $=$ Variable costs per unit$)$

$($VCU $($option A$)$ x Units$)+$ FC $($option A$)=($VCU $($option B$)$ x Units$)+$ FC $($option B$)$

The indifference point is $$ candles.

Wax $$6$

Other additives $$3$

Base $$3$

Two Leasing Options

Option A$)$ a lease of $$3,000$ per month; or

Option B$)$ a monthly lease cost of $$1,650$ plus $10\%$ of the company's monthly sales revenue.