Option 1: A fixed payment of $7,410 for the sale period

Option 2: 10% of total revenues earned during the sale period

Assume Cover Rugs will incur no other costs.

1.	Calculate the breakeven point in units for (a) option 1 and (b) option 2.
2.	At what level of revenues will Cover Rugs earn the same operating income under either option?
	a. For what range of unit sales will Cover Rugs prefer option 1?
	b. For what range of unit sales will Cover Rugs prefer option 2?
3.	Calculate the degree of operating leverage at sales of 65 units for the two rental options.
4.	Briefly explain and interpret your answer to requirement 3.

Save Homework: Ch 3 Graded Homework Score: 0.07 of 1 pt 10 of 13 (7 complete) HW Score: 46.72%, 6.07 of 13 pts 15 Question Help o E3-30 (book/static) Cover Rugs is holding a 2-week carpet sale at Josh's Club, a local warehouse store. Cover Rugs plans to sell carpets for $950 each. The company will purchase the carpets from a local distributor for $760 each, with the privilege of returning any unsold units for a full refund. Josh's Club has offered Cover Rugs two payment alternatives for the use of space. (Click the icon to view the additional information. Read the fequirement Requirement 1. Calculate the breakeven point in units for (a) option 1 and (b) option 2 Begin by determining the formula to calculate the breakeven point in units Number of units to breakeven Fixed cost Contribution margin per unit Calculate the breakeven point in units for option 1, then option 2. (Round your answers up to the nearest whole number. Enter "O" for zero balances.) Units (a) Option 1 (b) Option 2 ? Enter any number in the edit fields and then click Check Answer. Clear All Check Answer > parts remaining