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E7-34A Calculating total costs under two different scenarios (Learning Objective 5)

E7-34A Calculating total costs under two different scenarios
(Learning Objective 5) The Soft Glow Company plans to open a new retail store in Portland, Maine. The Soft Glow Company will sell specialty candles for an average of $30 each. The average
variable costs per candle are as follows: 0 Wax $6
‘ Other additives $3
‘ Base $3 The company is negotiating its lease for the new location. The landlord has offered two
leasing options:
Option A) a lease of $3,000 per month; or Option B) a monthly lease cost of $1 ,650 plus 10% of the company’s monthly sales
revenue. The company expects to sell approximately 250 candles per month. Requirements 1. Which lease option is more attractive for the company under its current sales expecta-
tions? Calculate the total lease cost under: 0 OptionA
0 OptionB

 
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