The Varsity Club sells souvenir items at university sporting events for $24 each. The souvenir items cost $16 each. The club is negotiating with the university administration to sell the items in a kiosk in the university student center. Three rental arrangements are under consideration:
Option 1: Pay rent of $2,000.
Option 2: Pay rent of $1,200 plus 10% of revenue; and
Option 3: Pay the university 25% of revenue;
The club estimates that it will be able to sell 300 souvenir items during the period.
Required:
1) Compute the break-even point in units for each of the three options.
2) Assuming the club reaches its sales target, which option should be chosen?

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The Answer of The Varsity Club sells souvenir items at university sporting events for $24 each. The souvenir items cost $16 each. The club is negotiating with the university administration to sell the items in a kiosk in the university student center. Three rental arrangements are under consideration:
Option 1: Pay rent of $2,000.
Option 2: Pay rent of $1,200 plus 10% of revenue; and
Option 3: Pay the university 25% of revenue;
The club estimates that it will be able to sell 300 souvenir items during the period.
Required:
1) Compute the break-even point in units for each of the three options.
2) Assuming the club reaches its sales target, which option should be chosen?

The Varsity Club Sells Souvenir Items at University Sporting Events