Which lease option should cost less each month

Reference no: EM135679

The Cupcake Factory plans to start a new retail store in Medina, Ohio. The Cupcake Factory may sell specialty cupcakes for $5 per cupcake (every cupcake has a variable cost of $2.) The company is negotiating its lease for the new Medina location. The landlord has provide two leasing options:

1) a lease of $2,000 per month; or

2) a monthly lease cost of $1,000 plus 4 percent of the company's monthly sales revenue.

Question 1) If the Cupcake Factory plans to sell 1,000 cupcakes a month, which lease option could cost less each month? Why?

Question 2) If the company plans to sell 1,800 cupcakes a month, which lease option could be more striking? Why?

Reference no: EM135679

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