Gyrdir ehf. manufactures and sells one type of leather belts for2,500 kr. piece. Production for each belt, all variable, amounts to1,000 kr. Gyrdir is planning to rent a booth on the forthcomingfashion show in the Exhibition Hall. Gyrdir ehf. can choose betweenthe following rental terms for the sales booth:
1. to pay only a fixed rent before the show, kr. 501,000.
2. to pay a fixed amount of kr. 400,000 and an additional 10% ofsales revenue.
3. to pay 20% of the sales revenue but no fixed amount.
Requested:
a) What does Gyrdir ehf. have to sell many multiple belts toreach a break-even point, based on
which of these three options?
b) What choice should Gyrdir ehf. choose if he expects to sell800 belts at the show? Show
calculations to justify the choice.
