Problem 7

Required: 1. & 3.

Problem 7 Doug Litwiller is interested in renting space from D&T Associates for a food service business. D&T Associates has provided three alternatives as follows: 1. $2,000 fixed rent per month 2. $1000 fixed rent per month plus 2 percent of sales 3. $1,500 fixed rent per month plus 4 percent of monthly sales in excess of $37,500 : Required: 1. Determine the indifference point. 2. Graph the three alternatives using Exhibit 11 as a guide. 3. If the average monthly sales are forecast to be $80,000, what will the total lease cost be under each alternative and which do you recommend ? Problem 7 Doug Litwiller is interested in renting space from D&T Associates for a food service business. D&T Associates has provided three alternatives as follows: 1. $2,000 fixed rent per month 2. $1000 fixed rent per month plus 2 percent of sales 3. $1,500 fixed rent per month plus 4 percent of monthly sales in excess of $37,500 : Required: 1. Determine the indifference point. 2. Graph the three alternatives using Exhibit 11 as a guide. 3. If the average monthly sales are forecast to be $80,000, what will the total lease cost be under each alternative and which do you recommend