Need Requirement 4. Dropdown box options: 1. Fixed Costs 2. Operating Income 3. Sales and Contribution Margin

"1.Higher 2. Lower 3. The same" Options for drop down box next to the words, "percentage change."

Curt Rugs is holding a two-week carpet sale at Josh's Club, a local warehouse store. Curt Rugs plans to sell carpets for $850 each. The company will purchase the carpets from a local distributor for $340 each, with the privilege of returning any unsold units for a full refund. Josh's Club has offered Curt Rugs two payment alternatives for the use of space. Option 1: A fixed payment of $18,870 for the sale period Option 2: 20% of total revenues earned during the sale period Assume Curt Rugs will incur no other costs. Read the requirements. First, determine the formula to calculate the level of revenues. Option 1 Variable costs Option 2 - Variable costs Sale price - - Fixed cost = Sale price - Fixed cost Now calculate the level of revenues. It will take 111 units to generate the same operating income under either option. The level of revenues under either option using these units equals $ 94350 a. For what range of unit sales will Curt Rugs prefer option 1? Option 1 would be preferred when units sold exceed the units you determined for the level of revenues when the two options earned the same operating income. b. For what range of unit sales will Curt Rugs prefer option 2? Curt Rugs would prefer option 2 when units sold are less than the units you determined for the level of revenues when the two options earned the same operating income Requirement 3. Calculate the degree of operating leverage at sales of 185 units for the two rental options. First, determine the formula to calculate the degree of operating leverage. Then, calculate the degree of operating leverage for Options 1 and 2. Degree of Contribution margin operating leverage Operating income Calculate the degree of operating leverage for option 1, then option 2. (Round your answers to two decimal places. X.XX) Option 1 1.25 Option 2 1.00 Requirement 4. Briefly explain and interpret your answer to requirement 3. These results indicate that, when sales are 185 units, a percentage change in will result in times that percentage change in V for Option 1. Whereas, option 2 has percentage change in