The Cupcake Factory plans to open a new retail store in Medina, Ohio. The Cupcake Factory will sell specialty cupcakes for $5 per cupcake (each cupcake has a variable cost of $2.) The company is negot

The Cupcake Factory plans to open a new retail store in Medina, Ohio. The Cupcake Factory will sell specialty cupcakes for $5 per cupcake (each cupcake has a variable cost of $2.) The company is negotiating its lease for the new Medina location. The landlord has offered two leasing options: 1) a lease of $2,000 per month; or 2) a monthly lease cost of $1,000 plus 4% of the company’s monthly sales revenue.

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

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

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