The Cupcake Factory plans to open a new retail store in Austin, Texas. The store will sell specialty cupcakes for $6 per cupcake (each cupcake has a variable cost of $3). The company is negotiating its lease for the new store. The landlord has offered two leasing options: 1) a lease of $2,000 per month; or 2) a monthly lease cost of $800 plus 5% of the company's monthly sales revenue.
Requirements
1. If the Cupcake Factory plans to sell 3,400 cupcakes a month, which lease option would cost less each month? Why?
2. If the company plans to sell 5,200 cupcakes a month, which lease option would be more attractive? Why?