Edible Bouquets (EB) makes and sells flower bouquets. EB is considering opening a new store in the local mall. The mall has several empty shops and EB is unsure of the demand for its product. The mall has offered EB two alternative rental agreements. The first is a standard fixed-rent agreement where EB will pay the mall $5,000 per month. The second is a royalty agreement where the mall receives $10 for each bouquet sold. EB estimates that a bouquet will sell for $50 and have a variable cost of $30 to make (including the cost of flowers and commission for the salesperson). Requirements The royalty agreement would be preferred at 0 units up to the indifference point Requirement 3 Next assume that EB signs a sales agreement with a local flower stand and saves $5 in variable costs per bouquet. Calculate the new indifference point. The indifference point is at 500 units. The answer from Requirement 3 is the same as the answer in Requirement 2. Requirement 4 Using information from the original problem, prepare a table that shows the expected profit at each sales level under each rental agreement. The sales levels are 200, 400, 600, 800, or 1,000 arrangements. Begin with the fixed rent agreement. (Use parentheses or a minus sign for losses.) Requirements Fixed rent agreement Expected Sales level Profit/(Loss) Profit/(Loss) 200 $ (1,000) 10,000 400 $ 3,000 20,000 600 $ 7,000 30,000 $ 11,000 40,000 1,000 $ 15,000 50,000 150,000 Total expected profit/(loss) Requirements 1. What is the breakeven point in units under each assumption? 2. For what range of sales levels will EB prefer (a) the fixed-rent agreement and (b) the royalty agreement? 3. If EB signs a sales agreement with a local flower stand, it will save $5 in variable costs per bouquet. How would this affect your answer in requirement 2? 4. EB estimates that the store is equally likely to sell 200, 400, 600, 800, or 1,000 arrangements. Using information from the original problem, prepare a table that shows the expected profit at each sales level under each rental agreement. What is the expected value of each rental agreement? Which rental agreement should EB choose? Enter any number in the edit fields and then click Check Answer. ? parts remaining Final Check