I own and manage a pretzel and lemonade concession cart. I decide I want to sell my products at a NASCAR race weekend. I have two rental options:
option 1- pay a commission of 30% of total sales
option 2- pay a fixed rent of $1000 for the entire weekend
other information: food and beverage cost of sales run at 20%. I will also need to pay an employee $400 to run the cart.
question 1: calculate breakeven point for each option.
question 2: estimation of sales for weekend is $2800. calculate operating leverage for each of the options.
question 3: there are 2 possibilities for sales over the weekend. the first is “average” or $2800. the second is “great” or $4200. calculate the profit potential for both options.