Use the Information for the Question(s)below

question 30

Essay

Use the information for the question(s)below.
Your firm is preparing to open a new retail strip mall and you have multiple businesses that would like to lease space in it.Each business will pay a fixed amount of rent each month plus a percentage of the gross sales generated each month.The cash flows from each of the businesses have approximately the same amount of risk.The business names,square footage requirements,and monthly expected cash flows for each of the businesses that would like to lease space in your strip mall are provided below:
-If your new strip mall will have 16,000 square feet of retail space available to be leased,to which businesses should you lease and why?

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Definitions:

Overhead Resources

Resources used in the day-to-day operations of a business that are not directly tied to a specific product or service, such as utilities and rent.

Plantwide Overhead Rate

An overhead rate applied uniformly across an entire plant or company, calculated without regard to individual departments or products.

Manufacturing Overhead Cost Driver

A factor that causes the cost of manufacturing overhead to change, such as machine hours or labor hours.

Predetermined Overhead Rate

A rate used to apply manufacturing overhead costs to products, calculated before the period begins based on estimated costs and activity levels.