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The Cupcake World Factory plans to open a new retail store in St. Louis, Missouri. The store will sell specialty cupcakes for $6 per
The Cupcake World Factory plans to open a new retail store in St. Louis, Missouri. The store will sell specialty cupcakes for $6 per cupcake (each cupcake has a variable cost of $3.) The company is negotiating its lease for the new store. The landlord has offered two leasing options: 1) a lease of $2,000 per month; or 2) a monthly lease cost of $800 plus 5% of the company's monthly sales revenue. Requirements 1. If the Cupcake World Factory plans to sell 3,000 cupcakes a month, which lease option would cost less each month? Why? 2. If the company plans to sell 5,500 cupcakes a month, which lease option would be more attractive? Why? Requirement 1. If the Cupcake World Factory plans to sell 3,000 cupcakes a month, which lease option would cost less each month? Why? Begin by calculating the indifference point. Select the equation to determine the indifference point. (Abbreviations used: FC = Fixed costs, VCU = Variable costs per unit) (VCU (option 1) Units) + FC (option 1) = (VCU (option 2) Units) + FC (option 2) The indifference point (in number of cupcakes) is
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