Cover Rugs is holding a 2-week carpet sale at Josh’s Club, a local warehouse store. Cover Rugs plans to sell carpets for $950 each. The company will purchase the carpets from a local distributor for $760 each, with the privilege of returning any unsold units for a full refund. Josh’s Club has offered Cover Rugs two payment alternatives for the use of space. ■ Option 1: A fixed payment of $7,410 for the sale period ■ Option 2: 10% of total revenues earned during the sale period Assume Cover Rugs will incur no other costs. Q1. Calculate the breakeven point in units for (a) Option 1 and (b) Option 2. Q2. At what level of revenues will Cover Rugs earn the same operating income under either option? a. For what range of unit sales will Cover Rugs prefer Option 1? b. For what range of unit sales will Cover Rugs prefer Option 2? Q3. Calculate the degree of operating leverage at sales of 65 units for the two rental options. 4. Briefly explain and interpret your answer to requirement 3.

Crane Windows manufactures and sells custom storm windows for three-season porches. Crane also provides installation service for the windows. The installation process does not involve changes in the windows, so this service can be performed by other vendors. Crane enters into the following contract on July 1, 2025, with a local homeowner. The customer purchases windows for a price of $2,670 and chooses Crane to do the installation. Crane charges the same price for the windows irrespective of whether it does the installation or not. The customer pays Crane $2,016 (which equals the standalone selling price of the windows, which have a cost of $1,250) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2025, Crane completes installation on October 15, 2025, and the customer pays the balance due. (a) Your answer is partially correct. Crane estimates the standalone selling price of the installation based on an estimated cost of…

Vishal

Nash Windows manufactures and sells custom storm windows for three-season porches. Nash also provides installation service for the windows. The installation process does not involve changes in the windows, so this service can be performed by other vendors. Nash enters into the following contract on July 1, 2020, with a local homeowner. The customer purchases windows for a price of $2,360 and chooses Nash to do the installation. Nash charges the same price for the windows irrespective of whether it does the installation or not. The customer pays Nash $1,920 (which equals the standalone selling price of the windows, which have a cost of $1,100) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2020, Nash completes installation on October 15, 2020, and the customer pays the balance due. (a)     Nash estimates the standalone selling price of the installation based on an estimated cost of $440 plus a margin of…