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The Yummy Delights Factory plans to open a new retail store in Orlando, Florida. The store will sell specialty cupcakes for $5 per cupcake (each
The Yummy Delights Factory plans to open a new retail store in Orlando, Florida. The store will sell specialty cupcakes for $5 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 $5,500 per month; or 2) a monthly lease cost of $2,500 plus 6% of the company's monthly sales revenue. Requirements 1. If the Yummy Delights Factory plans to sell 9,200 cupcakes a month, which lease option would cost less each month? Why? 2. If the company plans to sell 11,500 cupcakes a month, which lease option would be more attractive? Why? Requirement 1. If the Yummy Delights Factory plans to sell 9,200 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)
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