Breakeven operating leverage cost function decision You

are the advisor #4528

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.View Solution:
Breakeven operating leverage cost function decision You are the advisor

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