Karen hefner a florist operates retail stores in several, Ask an Expert

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Karen Hefner, a florist, operates retail stores in several shopping malls. The average selling price of an arrangement is $50 and the average cost of each sale is $30. She also pays a manager $7,500 per month. 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 $17,500 a month, or

2. paying a base rent of $10,000 plus 10% of revenue received, or

3. paying a base rent of $5,500 plus 20% of revenue received

Required:

Calculate the break-even in units under each option.
Calculate the net income under each option assuming that units sold are 5,000.
Which option should Karen choose?Support your answer.

	Option 1	Option 2	Option 3
Break-Even in Units
Net Income

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9796788

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