Bliss Company wants to open a new spa in a nearby plaza. Bliss Company will be...

 

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Bliss Company wants to open a new spa in a nearby plaza. Bliss Company will be offering half-day spa treatments for $150 each. Variable costs (not including the leasing costs below) are $95 for every treatment. In terms of lease payments, the plaza has provided the company with three options: i) $25 per treatment given i) $20,000 per month ii) $15,000 per month and $10 per treatment given a) Calculate the monthly operating profit for each of the three options if 300 treatments are given and if 700 treatments are given. Option i) Option i) Option i) b) At a level of 700 treatments, which option should be recommended? c) Calculate the degree of operating leverage for the second lease option if Bliss Company gives 700 treatments. Bliss Company wants to open a new spa in a nearby plaza. Bliss Company will be offering half-day spa treatments for $150 each. Variable costs (not including the leasing costs below) are $95 for every treatment. In terms of lease payments, the plaza has provided the company with three options: i) $25 per treatment given i) $20,000 per month ii) $15,000 per month and $10 per treatment given a) Calculate the monthly operating profit for each of the three options if 300 treatments are given and if 700 treatments are given. Option i) Option i) Option i) b) At a level of 700 treatments, which option should be recommended? c) Calculate the degree of operating leverage for the second lease option if Bliss Company gives 700 treatments.

Answer rating: 100% (QA)

a At 300 treatments Option 1 Option 2 Option 3 Service Revenue 45000 45000 45000 Less Var... View the full answer