Question: Breakeven, operating leverage, cost function decision You are the advisor of a Junior Achievement group in a local high school. You need to help the

Breakeven, operating leverage, cost function decision You are the advisor of a Junior Achievement group in a local high school. You need to help the group make a decision about fees that must be paid to sell gardening tools at the Home and Garden Show. The group sells a set of tools for $20.00. The manufacturing cost (all variable) is $6 per set. The Home and Garden Show coordinator allows the following three payment options for groups exhibiting and selling at the show:
1. Pay a fixed booth fee of $5,600.
2. Pay a fee of $3,800 plus 10% of all revenue from tool sets sold at the show.
3. Pay 15% of all revenue from tool sets sold at the show.
a. Compute the break-even number of tool sets for each option.
b. Which payment plan has the highest degree of operating leverage?
c. Which payment plan has the lowest risk of loss for the Junior Achievement group? Explain.

Step by Step Solution

★★★★★

3.36 Rating (168 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a Option A 5600 20 6 400 sets Option B this would increase the va... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

862-B-A-G-F-A (8536).docx

120 KBs Word File

Students Have Also Explored These Related Accounting Questions!

Project 3 is due by Tuesday, April 30. Send via the assignment area and make sure you save your file with first initial of first name and last name. You will be graded on the accuracy of your answer...

For each of the situations listed, identify the primary standard from the IMA Statement of Ethical Professional Practice that is violated (competence, confidentiality, integrity, or credibility.) 1....

The universitys Wildcat Lair caters to students and serves sandwiches and beverages. It has been reporting losses in past months. In July, for example, the loss was $5,000. The Lair purchases...

ACCY307: Chapter 3: CVP In-Class Exercise: You are the advisor of a Junior Achievement group in a local high school. You need to help the group make a decision about fees that must be paid to sell...

You are the advisor of a Junior Achievement group in a local high school. You need to help the group make a decision about fees that must be paid to sell gardening tools at the Home and Garden Show....

Q 6 ( 7 Marks ) You are the advisor of a Junior Achievement group in a local high school. You need to help the group make a decision about fees that must be paid to sell gardening tools at the Home...

Need help with the document attached. The company that this paper is about is Nvidia. Project Descriptions SEC 10-K Paper You will be asked to select a company that is publically traded. You must...

You are the advisor of a Sheridan Achievement group in a local high school. You need to help the group make a decision about fees that must be paid to sell gardening tools at the Home and Garden...

Label Each Question and Section: Read the Point/Counterpoint on page 534 of the text: Organizations Should Strive to Create Positive Organizational Culture Should organizations do everything they can...

Objective Cell (Max) Variable Cells A. Cell SH$1 4 SIS14 $J$14 $K$14 Cell Name $L$15 Objective Function Coefficients Constraints Cell a) b) c) use the answer and sensitivity reports below and...

Electrodo Co. purchased land for $55,000 with $20,000 paid in cash and $35,000 in notes payable. What effect does this transaction have on the accounts under the accrual basis of accounting? a. Net...

Initial Capital and Investment: A total initial capital requirement of $108,000 is established, allocated for essential startup items like website and platform development, content creation,...

A hierarchical structure of project resources organized by category and resource type, used in planning, managing and controlling project work, is: Team structure Resource Pool Organization Breakdown...

Crawford Enterprises started the 2009 accounting period with $50,000 of assets (all cash), $18,000 of liabilities, and $4,000 of common stock . During the year, Crawford earned cash revenues of...

The following unrelated events are typical of those experienced by business entities. 1. Acquire cash by issuing common stock. 2. Borrow cash from the local bank. 3. Pay office supplies expense. 4....

Doyer Corporation experienced the following transactions during 2010. 1. Paid a cash dividend to the stockholders. 2. Acquired cash by issuing additional common stock. 3. Signed a contract to perform...

The Lopez-Portillo Company has $11.3 million in assets, 90 percent financed by debt, and 10 percent financed by common stock. The interest rate on the debt is 10 percent and the par value of the...

Daily Enterprises is purchasing a $ 1 4 , 0 0 0 , 0 0 0 machine. The machine will depreciated using straight - line depreciation over its 6 year life and will have no salvage value. The machine will...

Assume the following rates are being utilized for the given yearly periods. Assume the following rates are being utilized for the given yearly periods. I = 8% for 0 lessthanorequalto t