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Chloe Rugs is holding a 2-week carpet sale at Jerry's Club, a local warehouse store. Chloe Rugs plans to sell carpets for $550 each. The company will purchase the carpets from a local distributor for $440 each, with the privilege of returning any unsold units for a full refund. Jerry's Club has offered Chloe Rugs two payment alternatives for the use of space. Requirements 1. Calculate the breakeven point in units for (a) option 1 and (b) option 2. 2. At what level of revenues will Chloe Rugs earn the same operating income under either option? a. For what range of unit sales will Chloe Rugs prefer option 1? b. For what range of unit sales will Chloe Rugs prefer option 2? 3. Calculate the degree of operating leverage at sales of 55 units for the two rental options. 4. Briefly explain and interpret your answer to requirement 3. Print Done Option 1 Option 2 (SPX Q) -(VCXQ) - FC = ( SP X Q) - ( VC Q) - FC Now calculate the level of revenues. It will take 60 units to generate the same operating income under either option. The level of revenues under either option using these units equal $ 42,000 a. For what range of unit sales will Color Rugs prefer option 1? Option 1 would be preferred when units sold exceed the units you determined for the level of revenues when the two options earned the same operating income b. For what range of unit sales will Color Rugs prefer option 2? Color Rugs would prefer option 2 when units sold are less than the units you determined for the level of revenues when the two options earned the same operating income. Requirement 3. Calculate the degree of operating leverage at sales of 60 units for the two rental options. Begin by determining the formula to calculate the degree of operating leverage. Then, calculate the degree of operating leverage for option 1, then option 2. (Round your answers to two decimal places. X.XX) Degree of operating leverage Contribution marginal Operating income = $ Option 1 Option 2 $ $ Requirement 4. Briefly explain and interpret your answer to requirement 3. The results indicate that, when sales are 60 units, a percentage change in will result in times that percentage change in for option 1 and times that percentage change in for option 2. sales and contribution margins operating income operating income Chloe Rugs is holding a 2-week carpet sale at Jerry's Club, a local warehouse store. Chloe Rugs plans to sell carpets for $550 each. The company will purchase the carpets from a local distributor for $440 each, with the privilege of returning any unsold units for a full refund. Jerry's Club has offered Chloe Rugs two payment alternatives for the use of space. Requirements 1. Calculate the breakeven point in units for (a) option 1 and (b) option 2. 2. At what level of revenues will Chloe Rugs earn the same operating income under either option? a. For what range of unit sales will Chloe Rugs prefer option 1? b. For what range of unit sales will Chloe Rugs prefer option 2? 3. Calculate the degree of operating leverage at sales of 55 units for the two rental options. 4. Briefly explain and interpret your answer to requirement 3. Print Done Option 1 Option 2 (SPX Q) -(VCXQ) - FC = ( SP X Q) - ( VC Q) - FC Now calculate the level of revenues. It will take 60 units to generate the same operating income under either option. The level of revenues under either option using these units equal $ 42,000 a. For what range of unit sales will Color Rugs prefer option 1? Option 1 would be preferred when units sold exceed the units you determined for the level of revenues when the two options earned the same operating income b. For what range of unit sales will Color Rugs prefer option 2? Color Rugs would prefer option 2 when units sold are less than the units you determined for the level of revenues when the two options earned the same operating income. Requirement 3. Calculate the degree of operating leverage at sales of 60 units for the two rental options. Begin by determining the formula to calculate the degree of operating leverage. Then, calculate the degree of operating leverage for option 1, then option 2. (Round your answers to two decimal places. X.XX) Degree of operating leverage Contribution marginal Operating income = $ Option 1 Option 2 $ $ Requirement 4. Briefly explain and interpret your answer to requirement 3. The results indicate that, when sales are 60 units, a percentage change in will result in times that percentage change in for option 1 and times that percentage change in for option 2. sales and contribution margins operating income operating income