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

Determining annual cash flows for the investment

The Keego Company is planning a $200,000 equipment investment which has an estimated five-year life with no estimated salvage value. The company has projected the following

Equivalent units of production-weighted average method

Of those started, 80,000 were finished and the remaining 40,000 were left 20% complete. Calculate the equivalent units of production for the year using the weighted average

Determine the effect on net income

Garner has sufficient unused capacity to produce the 2,000 scales. If the special order is accepted, what will be the effect on net income?

Determining annual rate of return

A financial analyst tells you that investing in stocks will allow you to triple your money in 15 years. What annual rate of return is the analyst assuming you can earn?

Calculate the monthly mortgage payment of principal

Calculate the monthly mortgage payment of principal and interest for the a loan with an initial balance of 150,000, an annual stated interest rate of 6%, and 30 years to mat

What technique can crawford use to accomplish its goal

Crawford, Inc., wants to acquire the assets of Toxic Waste, Inc., but Toxic Waste won't sell. Toxic Waste is a publicly held company with widely dispersed share ownership. W

Type of gain will result from the sale

Tom sells a business machine which he was owned for four years for $27,000. Tom purchased the machine for $42,000 and taken $18,000 in depreciation. How much and what type o

Assignment-capital investment decisions

Discuss how the changes in the lending regulatory environment, particularly with the passage of the Dodd-Frank Act, has impacted the bank's ability to lend money to businesses


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