Cathy Rugs is holding a 2-week carpet salo at Jacks Club, a local warohouse ctore, Cathy Rugs plans to sel carpets for $700 each. The company witi purchase the cappets ftom a bocal Eistriutcr for $420 each, with the pevlege of returning ary unsold unts for a full refund. Jack's Club has offered Cathy Rugs two payment altematives for the use of space. (1) (Cick the icon to vew the adistional informaton) Read the requirements. Requirement 1, Calculate the breakeven point in units for (a) Option 1 and (b) Option 2 Beoin by determining the formala to calculate the breakeven point in unat More info - Option 1: A fixed payment of $8,400 for the sale period - Option 2: 20% of total revenues earned during the sale period Assume Cathy Rugs will incur no other costs. Requirements 1. Calculate the breakeven point in units for (a) option 1 and (b) option 2. 2. At what level of revenues will Cathy Rugs earn the same operating income under either option? a. For what range of unit sales will Cathy Rugs prefer Option 1 ? b. For what range of unit sales will Cathy Rugs prefer Option 2? 3. Calculate the degree of operating leverage at sales of 60 units for the two rental options. 4. Briefly explain and interpret your answer to requirement 3 . Cathy Rugs is holding a 2-week carpet salo at Jacks Club, a local warohouse ctore, Cathy Rugs plans to sel carpets for $700 each. The company witi purchase the cappets ftom a bocal Eistriutcr for $420 each, with the pevlege of returning ary unsold unts for a full refund. Jack's Club has offered Cathy Rugs two payment altematives for the use of space. (1) (Cick the icon to vew the adistional informaton) Read the requirements. Requirement 1, Calculate the breakeven point in units for (a) Option 1 and (b) Option 2 Beoin by determining the formala to calculate the breakeven point in unat More info - Option 1: A fixed payment of $8,400 for the sale period - Option 2: 20% of total revenues earned during the sale period Assume Cathy Rugs will incur no other costs. Requirements 1. Calculate the breakeven point in units for (a) option 1 and (b) option 2. 2. At what level of revenues will Cathy Rugs earn the same operating income under either option? a. For what range of unit sales will Cathy Rugs prefer Option 1 ? b. For what range of unit sales will Cathy Rugs prefer Option 2? 3. Calculate the degree of operating leverage at sales of 60 units for the two rental options. 4. Briefly explain and interpret your answer to requirement 3
