Determine the indifference point

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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. $1,000 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 alternative using Exhibit 11 as 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?

Reference no: EM132052548

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