Karen Hefner, a florist, operates retail stores in several shopping malls. The average selling price of an arrangement is $30 and the average cost of each sale is $18. A new mall is opening where Karen wants to locate a store, but the location manager is not sure about the rent method to accept. The mall operator offers the following three options for its retail store rentals:
1. paying a fixed rent of $15,000 a month, or
2. paying a base rent of $9,000 plus 10% of revenue received, or
3. paying a base rent of $4,800 plus 20% of revenue received up to a maximum rent of $25,000.
Required:
a. For each option, compute the break-even sales and the monthly rent paid at break-even.
b. Beginning at zero sales, show the sales levels at which each option is preferable up to 5,000 units.

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The Answer of Karen Hefner, a florist, operates retail stores in several shopping malls. The average selling price of an arrangement is $30 and the average cost of each sale is $18. A new mall is opening where Karen wants to locate a store, but the location manager is not sure about the rent method to accept. The mall operator offers the following three options for its retail store rentals:
1. paying a fixed rent of $15,000 a month, or
2. paying a base rent of $9,000 plus 10% of revenue received, or
3. paying a base rent of $4,800 plus 20% of revenue received up to a maximum rent of $25,000.
Required:
a. For each option, compute the break-even sales and the monthly rent paid at break-even.
b. Beginning at zero sales, show the sales levels at which each option is preferable up to 5,000 units.

Karen Hefner, a Florist, Operates Retail Stores in Several Shopping