Quizzol

QUESTION:

plans to open a new retail store in

Biddeford,

Maine. The store will sell specialty candles for an average of

$ 10

each.

View the average variable costs per candle.

The company is negotiating its lease for the new location.

View the two leasing options that the landlord has offered.

The company expects to sell approximately

400

candles per month.

Read the requirements.

Requirement 1. Which lease option is more attractive for the company under its current sales expectations? Calculate the total lease cost under Option A and Option B.

Begin by identifying the formula to calculate the total costs.

		+		=	Total lease costs

ANSWER:

Requirement 1. Which lease option is more attractive for the company under its current sales expectations? Calculate the total lease cost under Option A and Option B.

Begin by identifying the formula to calculate the total costs.

	Total fixed expenses (lease)	+	Total variable expenses (lease)	=	Total lease costs

(Consider only the fixed and variable costs related to the lease options.)

The total lease cost under Option A is	$2,500	.

(Consider only the fixed and variable costs related to the lease options.)

The total lease cost under Option B is	$2,400	.

Which lease option is more attractive for the company under its current sales expectations?

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

because it

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) + FC (option A) = (VCU (option B) x Units) + FC (option B)

The indifference point is	500	candles.

Show your proof. (Consider only the fixed and variable costs related to the lease options. Complete all input fields. Enter a "0" for zero balances.)

	Option A	Option B
Total fixed expenses	$2,500	$2,000
Total variable expenses	0	500
Total lease costs	$2,500	$2,500

Requirement 3. If the company's expected sales were

1 comma 000

candles instead of the projection listed in the exercise, which lease option would be more favorable for the company? Why?

The lease option that is more attractive for the company if the company plans to sell

1 comma 000

candles a month is

because the

Posted by Cleveland on September 29, 2024

Question content area bottom

Part 1

Part 2

Part 3

Part 4

Part 5

Part 6

Part 7

Part 8