CEBU INSTITUE OF TECHNOLOGY UNIVERSITY

Acctg 136 | Management Science

Group Project | Prelims

PROBLEM 2

Bulaklak Flower, a florist, operates retail stores in several shopping malls. The average selling price of an arrangement is
P300 and the average cost of each sale is P180. A new mall is opening where Karen wants to locate a store, but
the location manager is not sure about the rent method to accept. The mall operator offers the following three
options for its retail store rentals:

1. paying a fixed rent of P150,000 a month, or

2. paying a base rent of P90,000 plus 10% of revenue received, or
3. paying a base rent of P48,000 plus 20% of revenue received up to a maximum rent of P250,000.

Required:
a. For each option, compute the breakeven sales and the monthly rent paid at break-even.
b. Beginning at zero sales, show the sales levels at which each option is preferable up to 5,000 units.

A.
PROBLEM DATA OPTION 1 OPTION 2
Fixed Cost 150000 90000
Variable Cost Per Unit 180 210
Selling Price Per Unit 300 300
MODEL
Sales Volume 1250 1000
Total Revenue 375000 300000
Total Rent 375000 300000
Total Profit(Loss) 0 0

B.
PROBLEM DATA OPTION 1 OPTION 2
Fixed Cost 150000 90000
Variable Cost Per Unit 180 210
Selling Price Per Unit 300 300
MODEL
Sales Volume 5000 5000
Total Revenue 1500000 1500000
Total Rent 1050000 1140000
Total Profit(Loss) 450000 360000

GROUP 2 MEMBERS:
Acuña, Jessa Mae
Jorge, Ma Sonia M.
Soterol, Sharriz R.
HNOLOGY UNIVERSITY
gement Science
ct | Prelims

s. The average selling price of an arrangement is

where Karen wants to locate a store, but
mall operator offers the following three

maximum rent of P250,000.

paid at break-even.
preferable up to 5,000 units.

OPTION 3
48000
240
300

800
240000
240000
0

OPTION 3
48000
240
300

5000
1500000
1248000
252000