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- 1. Multiple Choice
The difference between the actual output and the breakeven level is known as the:
Buffer zone
Minimum cost line
Current ratio
Margin of safety
- 2. Multiple Choice
At any level of output below the breakeven point, a business will:
Make a profit
Make a loss
Increase selling price
Incur fixed costs
- 3. Multiple Choice
Which of these formulae defines the point at which breakeven occurs?
None of these
Total Revenue = Total Costs
Total Profit = Total Costs
Total Revenue = Total Price
- 4. Multiple Choice
Breakeven output can be calculated by dividing total fixed costs by:
Variable cost per unit sold
Selling price per unit sold
Contribution per unit sold
Total variable costs
- 5. Multiple Choice
A limitation of the usefulness of breakeven analysis is that:
Variable costs may fall over time
Most business people don't understand it
Revenues are impossible to forecast
Not all output will be sold
- 6. Multiple Choice
A benefit of using breakeven analysis is that a firm can:
Analyse future cash flows
Assess the effect of changes in selling price on profit
Avoid any fixed costs
Guarantee to earn a profit
- 7. Multiple Choice
If the margin of safety is 7,500 units and breakeven output is 12,200 units, what is actual output?
4,700 units
19,700 units
$19,700
$4,700
- 8. Multiple Choice
An option for a firm looking to reduce its breakeven point is to:
Reduce its selling price
Undertake an advertising campaign
Give the staff a pay rise
Buy cheaper raw materials
- 9. Multiple Choice
A baker's fixed costs are $10,000, sells cakes at SP of $45 and the VC per cake is $25. What is the breakeven level of production?
500 units
20 units
50 units
5,000 units
- 10. Multiple Choice
Other things remaining the same, an increase in fixed costs will:
Increase the breakeven output
Reduce unit costs
Decrease the breakeven output
Increase contribution
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