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

question 126

Essay

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 breakeven 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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Definitions:

Choosing a course

The process of selecting an educational or training path that aligns with one's interests, career goals, or academic requirements.

Decision-making model

A conceptual framework or process used to make systematic and informed choices among available options.

Vroom, Yetton, and Jago

Refers to a model of decision-making that outlines how leaders can choose among different leadership styles based on certain situational variables.

Authority decisions

decisions made by individuals in positions of power within an organization, often without extensive consultation.