Marsha Marsh Is Going to Sell Christmas Tree Lights for $20

question 180

Multiple Choice

Marsha Marsh is going to sell Christmas tree lights for $20 a box.The lights cost Marsha $5 a unit and any unsold lights can be returned for a full refund.She is planning to rent a booth at the upcoming Baggy Green's Christmas Convention,which offers three options:
1.paying a fixed fee of $1500,or
2.paying a $500 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)Contribution margin will vary depending upon the option chosen.
• B)One of the options will allow Marsha to break even,even if she doesn't sell any lights.
• C)Operating profit will be the greatest for Option 3.
• D)Her decision will determine the risk she faces.

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Definitions:

Marketable Securities

Financial instruments that can easily be converted into cash, typically with high liquidity and short maturity periods.

Short-Term Financing

Borrowing options intended for use over a short period, often to support the day-to-day operations of a business.

Maturity Factoring

Short-term financing in which the factor purchases all of a firm’s receivables and forwards the proceeds to the seller as soon as they are collected.

Short-Term Financing

Borrowing funds or obtaining financial support for a short duration, typically less than a year, to cover immediate needs.