Payment alternatives for the use of space

Assignment Help Accounting Basics
Reference no: EM13122852

Color Rugs is holding a two-week carpet sale at Jerry's club, a local warehouse store. Color Rugs plans to sell carpets for $500 each. The company will purchase the carpets from a local distributor for $350 each, with the privilege of returning any unsold units for a full refund. Jerry's club has offered Color Rugs two payment alternatives for the use of space.

Option 1: A fixed payment of $5,000 for the sale period

Option 2: 10% of total revenue earned during the sale period

Assume color rugs will incur no other costs.

1. Calculate the breakeven point in units for (a) option 1 and (b) option 2

2. At what level of revenues will Color Rugs earn the same operating income under either option?

a. For what range of unit sales will color rugs prefer option 1?
b. For what range of unit sales will Color rugs prefer option 2?

3. Calculate the degree of operative leverage at sales of 100 units for the two rental options.

4. Briefly explain and interpret your answer to requirement 4.

Reference no: EM13122852

Impairment testing purpose

How should Home Computer classify (for impairment testing purposes) the assets to be scrapped in the video monitor operations and the assets to be sold in the printer manufa

Effects of adjusting entries on the accounting equation

Prepare a table to summarize the required adjusting entries as they affect the accounting equation. Use the format in Exhibit 3-1 on page 109. Identify each adjustment by le

Hours of community service

Earlier this year, Kerry ran up $80,000 in bets that she did not pay for and won only $33,000. She was unable to cover this large loss and turned herself in to her employer.

Define and discuss cash equivalent and provide three example

Define and discuss cash equivalents and provide three examples. Discuss amortization and provide three examples where amortization schedules will come in handy in the busines

Accounting approaches become embodied in accounting standard

If constituency support is necessary before particular accounting approaches become embodied in accounting standards, does this have implications for the ‘neutrality' and ‘r

What is the null hypothesis

The owner of the store from Chapter 12, Exercise 1, wants to know if the mean age of all customers is 25 years old. a) What is the null hypothesis? b) Is the alternative

Trial balance

The trial balance of Lozier Inc. shows a $52,000 outstanding balance in Accounts Receivable at the end of 2008. During 2009, 80 percent of the total credit sales of $2,600,000

Problem regarding the incubator business

The new business "incubator" was assigned the 200 numbers between 452-2500 and 452-2699, but these businesses don't subscribe to digital TV. What is the probability that the


Write a Review

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd