Question

A merchant signs a lease that sets a minimum monthly rental rate of $600, or 6% gross sales. If rent is computed on a monthly basis, what is the total amount of rent paid in the fourth quarter if gross sales were $8,000 in October, $11,000 in November, and $12,000 in December?

Answer 1

To find the total rent for the fourth quarter, calculate the greater of the minimum monthly rental rate or the percentage of gross sales for each month and sum them up. For the months of October, November, and December, the respective rents are $600, $660, and $720, resulting in a total of $1,980.

Step-by-step explanation:

To calculate the total amount of rent paid in the fourth quarter based on the minimum monthly rental rate or percentage of gross sales, we need to determine the greater amount for each month and then sum them. The lease states a minimum rent of $600 or 6% of gross sales. Here's the computation:

• October: Gross sales = $8,000; Rent = 6% of $8,000 = $480. Since this is less than the minimum rent, the rent paid will be $600.
• November: Gross sales = $11,000; Rent = 6% of $11,000 = $660. This is higher than the minimum rent, so the rent paid will be $660.
• December: Gross sales = $12,000; Rent = 6% of $12,000 = $720. This is higher than the minimum rent, so the rent paid will be $720.

Adding these amounts gives us the total rent for the fourth quarter:
Total rent = $600 (October) + $660 (November) + $720 (December) = $1,980.