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Determine how many packs she needs to sell

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Question - Your friend is considering renting a shop at Dubai global village to make & sell Churros. She gathered that the global village will be open for 6 months and she must pay a total of AED 50,000 plus 10% of sales revenues as rent. She realized that she must hire 2 staff members and she'll have to pay them a salary over the festival period of AED 18,000 each. She contacted some shops specialized in kitchen appliances & found out that she can rent all the equipment needed over the festival period for AED 9,000. She bought the ingredients and experimented making the churros at home and found out that one pack will cost her AED 4 and she plans to sell it for AED10.

Required -

a. Determine how many packs she needs to sell over the festival period to breakeven?

b. Assume the festival administration are giving her a choice between the rent mentioned above and a one lump sum payment of AED75,000. Other things are the same. Which one would you recommend if she expects to sell 3,000 packs per month?

Reference no: EM132846909

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