Romper Rugs is holding two-week carpet sale at Tommy's Club, a local warehouse store. Romper Rugs plans to sell carpets for $500 each. The company will purchase the carpets from a local distributor for $350 each, with the privilege of returning any unsold units for a full refund. Tommy's club has offered Romper Rugs two payment options for the use of space

Option 1: A fixed payment of $5 000 for the sale period

Option 2: 10% of total revenue earned during the sale period. Assume Romper Rugs will incur no other costs.

a. Calculate the breakeven point in units for : (i) option 1 and (ii) option 2

b. At what level of revenues will Romper Rugs earn the same profit under either option? (i) For what range of unit sales will the company prefer option 1? (ii) For what range of unit sales will the company prefer option 2?

c. Calculate the degree of operating leverage at sales of 100 carpets for the two rental options.

d. Explain and interpret your answer to requirement c)