Question: J P Max is a department store carrying a large

J. P. Max is a department store carrying a large and varied stock of merchandise. Management is considering leasing part of its floor space for $ 72 per square foot per year to an outside jewelry company that would sell merchandise. Two areas currently in use are being considered: home appliances (1,000 square feet) and televisions (1,200 square feet). These departments had annual profits of $ 64,000 for appliances and $ 82,000 for televisions after allocated fixed occupancy costs of $ 7 per square foot were deducted. Allocated fixed occupancy costs include property taxes, mortgage interest, insurance, and exterior maintenance for the department store.

Considering all the relevant factors, which department should be leased and why?

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  • CreatedDecember 15, 2014
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