The Varsity Club Sells Souvenir Items at University Sporting Events

Essay

The Varsity Club sells souvenir items at university sporting events for $24 each. The souvenir items cost $16 each. The club is negotiating with the university administration to sell the items in a kiosk in the university student center. Three rental arrangements are under consideration:
Option 1: Pay rent of $2,000.
Option 2: Pay rent of $1,200 plus 10% of revenue; and
Option 3: Pay the university 25% of revenue;
The club estimates that it will be able to sell 300 souvenir items during the period.
Required:
1) Compute the break-even point in units for each of the three options.
2) Assuming the club reaches its sales target, which option should be chosen?