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The Tasty Treats Factory plans to open a new retail store in Medina, Ohio. The Tasty Treats…

The Tasty Treats Factory plans to open a new retail store in Medina, Ohio. The Tasty Treats Factory will sell specialty cupcakes for $6 per cupcake (each cupcake has a variable cost of $4.) The company is negotiating its lease for the new Medina location. The landlord has offered two leasing options: 1) a lease of $2,600 per month; or 2) a monthly lease cost of $1,700 plus 5% of the company’s monthly sales revenue.

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1. If the Tasty Treats Factory plans to sell 2,200 cupcakes a month, which lease option would cost less each month? Why?

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2. If the company plans to sell 4,500 cupcakes a month, which lease option would be more attractive? Why?

 

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