A company wants to open a new store in one of three nearby shopping malls. In Mall A, the rent will be $300,000 per year. In Mall B, the rent will be ... Accounting MCQs | Accounting MCQs

A company wants to open a new store in one of three nearby shopping malls. In Mall A, the rent will be $300,000 per year. In Mall B, the rent will be 4% of gross revenues. In Mall C, the rent will be $150,000 per year plus 3% of gross revenues. Assume that revenues and all other elements under consideration are the same for all three malls.
If the company expects revenues to be $10,000,000 per year, which mall should be chosen?

Mall A.
Mall B.
Mall C.
The company will be indifferent between two of the choices.Show Result

Correct - Your answer is correct.

Wrong - Your answer is wrong.

Detailed Answer

Answer (A) is correct. If the company expects revenues to be $10,000,000 per year, the calculation is as follows: Mall A: $300,000
Mall B: $10,000,000 × 4% = $400,000
Mall C: $10,000,000 × 3% = $300,000 + $150,000 = $450,000
Thus, Mall A is preferable.