The Candle Company plans to open a new retail store in

Portland, Maine. The store will sell specialty candles for an

average of $$10$ each. The average variable costs per

candle are as follows:

Wax $$4$

Other additives $$2$

Base $$1$

The company is negotiating its lease for the

new location. The landlord has offered two

leasing options:

Option A$)$ a lease of $$2,500$ per month; or

Option B$)$ a monthly lease cost of $$2,000$

plus $10\%$ of the company's monthly sales

revenue.

The company expects to sell approximately

$400$ candles per month.

The lease option that is more attractive for the company under its current sales expectations is

option B$,$ the fixed lease payment plus sales based commission because it results in the lowest total lease costs

Requirement $2.$ At what level of sales $($in units$)$ would the company be indifferent between the two lease options?

Show your proof.

Begin by selecting the equation to determine the indifference point. $($Abbreviations used" FC $=$ Fixed costs, VCU $=$

Variable costs per unit$)$

$(VCU($ option $A)x$ Units $)+FF(optionA)=($ VCU $(optionB)x$ Units $)+FC(optionB)$