Break-Even Analysis

Description: Break-Even Analysis Quiz
Number of Questions: 14
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Tags: break-even analysis engineering economics
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What is the break-even point?

  1. The point at which total revenue equals total cost

  2. The point at which total revenue exceeds total cost

  3. The point at which total cost exceeds total revenue

  4. The point at which total revenue is equal to total fixed cost


Correct Option: A
Explanation:

The break-even point is the point at which total revenue equals total cost. At this point, the company is neither making a profit nor a loss.

What is the formula for calculating the break-even point in units?

  1. Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)

  2. Fixed Costs / (Selling Price per Unit + Variable Cost per Unit)

  3. Fixed Costs / (Selling Price per Unit / Variable Cost per Unit)

  4. Fixed Costs / (Selling Price per Unit * Variable Cost per Unit)


Correct Option: A
Explanation:

The formula for calculating the break-even point in units is Fixed Costs / (Selling Price per Unit - Variable Cost per Unit).

What is the formula for calculating the break-even point in dollars?

  1. Fixed Costs / (Contribution Margin)

  2. Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)

  3. Fixed Costs / (Selling Price per Unit + Variable Cost per Unit)

  4. Fixed Costs / (Selling Price per Unit * Variable Cost per Unit)


Correct Option: A
Explanation:

The formula for calculating the break-even point in dollars is Fixed Costs / (Contribution Margin).

What is the contribution margin?

  1. Selling Price per Unit - Variable Cost per Unit

  2. Selling Price per Unit + Variable Cost per Unit

  3. Selling Price per Unit / Variable Cost per Unit

  4. Selling Price per Unit * Variable Cost per Unit


Correct Option: A
Explanation:

The contribution margin is the difference between the selling price per unit and the variable cost per unit.

What is the relationship between the contribution margin and the break-even point?

  1. The contribution margin is equal to the break-even point

  2. The contribution margin is greater than the break-even point

  3. The contribution margin is less than the break-even point

  4. The contribution margin is not related to the break-even point


Correct Option: B
Explanation:

The contribution margin is greater than the break-even point because the contribution margin includes the fixed costs.

What is the impact of fixed costs on the break-even point?

  1. Fixed costs increase the break-even point

  2. Fixed costs decrease the break-even point

  3. Fixed costs have no impact on the break-even point

  4. Fixed costs are not related to the break-even point


Correct Option: A
Explanation:

Fixed costs increase the break-even point because they must be covered by the contribution margin before the company can start to make a profit.

What is the impact of variable costs on the break-even point?

  1. Variable costs increase the break-even point

  2. Variable costs decrease the break-even point

  3. Variable costs have no impact on the break-even point

  4. Variable costs are not related to the break-even point


Correct Option: B
Explanation:

Variable costs decrease the break-even point because they are only incurred when the company produces and sells units.

What is the impact of selling price on the break-even point?

  1. Increasing the selling price increases the break-even point

  2. Increasing the selling price decreases the break-even point

  3. Increasing the selling price has no impact on the break-even point

  4. Increasing the selling price is not related to the break-even point


Correct Option: B
Explanation:

Increasing the selling price decreases the break-even point because it increases the contribution margin.

What is the impact of volume on the break-even point?

  1. Increasing volume increases the break-even point

  2. Increasing volume decreases the break-even point

  3. Increasing volume has no impact on the break-even point

  4. Increasing volume is not related to the break-even point


Correct Option: B
Explanation:

Increasing volume decreases the break-even point because it increases the total revenue.

What is the difference between a profit and a loss?

  1. A profit is when total revenue exceeds total cost

  2. A profit is when total cost exceeds total revenue

  3. A loss is when total revenue exceeds total cost

  4. A loss is when total cost exceeds total revenue


Correct Option: A
Explanation:

A profit is when total revenue exceeds total cost. A loss is when total cost exceeds total revenue.

What is the relationship between the break-even point and the profit margin?

  1. The break-even point is equal to the profit margin

  2. The break-even point is greater than the profit margin

  3. The break-even point is less than the profit margin

  4. The break-even point is not related to the profit margin


Correct Option: C
Explanation:

The break-even point is less than the profit margin because the profit margin includes the fixed costs.

What is the relationship between the break-even point and the degree of operating leverage?

  1. The break-even point is equal to the degree of operating leverage

  2. The break-even point is greater than the degree of operating leverage

  3. The break-even point is less than the degree of operating leverage

  4. The break-even point is not related to the degree of operating leverage


Correct Option: B
Explanation:

The break-even point is greater than the degree of operating leverage because the degree of operating leverage is a measure of the company's fixed costs.

What is the relationship between the break-even point and the margin of safety?

  1. The break-even point is equal to the margin of safety

  2. The break-even point is greater than the margin of safety

  3. The break-even point is less than the margin of safety

  4. The break-even point is not related to the margin of safety


Correct Option: C
Explanation:

The break-even point is less than the margin of safety because the margin of safety is a measure of the company's ability to absorb losses.

What is the relationship between the break-even point and the target profit?

  1. The break-even point is equal to the target profit

  2. The break-even point is greater than the target profit

  3. The break-even point is less than the target profit

  4. The break-even point is not related to the target profit


Correct Option: C
Explanation:

The break-even point is less than the target profit because the target profit includes the fixed costs and the desired profit.

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