Melissa Valdez is planning to expand her clothing business by opening another store. In planning for the new store, Melissa believes that selling prices and costs of the various products sold will be simlar to that of the existing store. In fact, she thinks that variable and fixed costs for the new store will be similar to that of the existing store, except that rent for the new store will be $300 per month more than the rent paid for the existing store. The followig information is available for the existing store for the year ended December 31, 2004:
- Sales $200,00
- Variable cost 130,000
- Fixed cost 48,800
Deteremine the sales required for the new store to break even. Determine the sales required for the new store to earn a profit of $20,000 per year (keep in mind that the $300 increase in rent is a monthly amount and the fixed cost of $48,000 is an annual amount)