Question - The group sells a set of tools for $20. The manufacturing cost (all variable) is $6 per set.
1. Pay a fixed booth fee of $5,600
2. Pay a fee of $3,800 plus 10% of all revenue from tools sets sold at the show
3. Pay 15% of all revenue from tool sets sold at the show
A. Compute the breakeven number of tools for each option.
B. Which payments have the highest degree of operating leverage?
C. Which payment plan has the lowest risk of loss for the organization? Explain
D. At what level of revenue should the group be indifferent to options 1 and 2?
E. Which option should junior achievement choose, assuming sales are expected to be 1,000 sets of tool? Explain.