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Mrs. Tisdale is going to sell Christmas tree lights for $40 a box. The lights cost Mrs. Tisdale $10 ...

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Mrs. Tisdale is going to sell Christmas tree lights for $40 a box. The lights cost Mrs. Tisdale $10 ...

Mrs. Tisdale is going to sell Christmas tree lights for $40 a box. The lights cost Mrs. Tisdale $10 a box and any unsold lights can be returned for a full refund. She is planning to rent a booth at the upcoming Happy Holidays Convention, which offers three options:
   1.   paying a fixed fee of $3,000, or
   2.   paying a $1,000 fee plus 10% of revenues made at the convention, or
   3.   paying 25% of revenues made at the convention.

Which of the following statements is FALSE?
A) Her decision will determine the risk she faces.
B) Contribution margin will vary depending upon the option chosen.
C) One of the options will allow Mrs. Tisdale to break even, even if she doesn't sell any lights.
D) Operating income will always be the greatest for Option 3.
E) Option 3 has the lowest operating leverage.

Textbook

Cost Accounting: A Managerial Emphasis, Canadian Edition

Edition: 7^th

Authors: Horngren, Datar, Rajan, Beaubien

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