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The most important fact given in this question is that Jack Blaze's risk tolerance is low. The most important fact not given is sales volume, which is not known. If he were to commit to paying any rental amount that includes a fixed amount, he might not sell enough to cover the fixed cost and could lose money.
The most important fact given in this question is that Jack Blaze's risk tolerance is low. The most important fact not given is sales volume, which is not known. If he were to commit to paying any rental amount that includes a fixed amount, he might not sell enough to cover the fixed cost and could lose money. So he should choose option 3, because with that option, he is keeping all of his expenses variable. The selling price will be $100 per unit, the variable cost is $20 per unit, and his rent will be 30% of his revenue, or $30 per unit. As long as he keeps any other expenses variable and under $50 per unit ($100 ? $20 ? $30), he will be virtually assured of making a profit. His risk of losing money is very low.
The most important fact given in this question is that Jack Blaze's risk tolerance is low. The most important fact not given is sales volume, which is not known. And expected sales volume is only that: expected. Expected sales volume might not be realized. If he were to commit to paying any rental amount that includes a fixed amount, he might not sell enough to cover the fixed cost and could lose money.
The most important fact given in this question is that Jack Blaze's risk tolerance is low. The most important fact not given is sales volume, which is not known. If he were to commit to paying any rental amount that includes a fixed amount, he might not sell enough to cover the fixed cost and could lose money.