Select the correct statement from the following:

A. A fixed cost structure offers less risk (i.e., less earnings volatility) and higher opportunity for profitability than does a variable cost structure.

B. A variable cost structure offers less risk and higher opportunity for profitability than does a fixed cost structure.

C. A fixed cost structure offers greater risk but higher opportunity for profitability than does a variable cost structure.

D. A variable cost structure offers greater risk but higher opportunity for profitability than does a fixed cost structure.

The Correct Answer is Option C.

A fixed cost structure offers greater risk but higher opportunity for profitability than does a variable cost structure.Under a fixed cost structure, once the fixed costs are recovered the profitability increases at a higher rate than under a variable cost structure.