Question 1

Assume a fixed cost for a process of $15,000.The variable cost to produce each unit of product is $10 and the selling price for the finished product is $25.Which of the following is the number of units that has to be produced and sold to break even?

A)500 units
B)667 units
C)790 units
D)900 units
E)1,000 units

E

Accepted Answer

E

Question 2

Assume a fixed cost for a process of $120,000.The variable cost to produce each unit of product is $35,and the selling price for the finished product is $50.Which of the following is the number of units that has to be produced and sold to break even?

A)5,000 units
B)6,000 units
C)8,000 units
D)11,000 units
E)12,000 units

C

Accepted Answer

To break even, the total revenue earned from selling the units must be equal to the total cost (fixed cost + variable cost) incurred in producing those units.
Let the number of units to be produced and sold be 'x'.
Total revenue = Selling price per unit * Number of units
= $50x
Total Cost = Fixed Cost + Variable cost per unit * Number of units
= $120,000 + $35x
For break-even, Total revenue = Total Cost
$50x = $120,000 + $35x
$15x = $120,000
x = 8,000 units

Therefore, the number of units that has to be produced and sold to break even is 8,000 units.

Question 3

Break-Even Analysis can be used to help decide whether to perform a task with a special purpose machine or with a general purpose machine.

Accepted Answer

Break-Even Analysis helps in determining the point at which the total cost of using a special purpose machine is the same as the total cost of using a general purpose machine. Thus, it can aid in deciding whether to perform a task with a special purpose machine or with a general purpose machine.

Question 4

Assume a fixed cost for a process of $10,000.The variable cost to produce each unit of product is $30,and the selling price for the finished product is $50.Ignoring inventory,how many units must the firm sell to break even?

A)200 units
B)300 units
C)400 units
D)500 units
E)600 units

Accepted Answer

To break even, the total revenue must equal the total costs. The fixed cost is $10,000, and the variable cost per unit is $30. The selling price per unit is $50, so the contribution margin per unit is $50 - $30 = $20. The break-even point in units is calculated as fixed costs divided by the contribution margin per unit: $10,000 / $20 = 500 units.

Question 5

You are hired as a consultant to decide if your client should purchase a new,highly specialized,piece of equipment.The product to be produced by this equipment is forecast to have a total worldwide demand of 15,000 units over the entire product life.The initial investment to acquire and install the equipment is $256,000.The variable cost to produce each unit will be $15 and the selling price for the finished product will be $30.Which of the following best describes the situation the firm is facing?

A)The company will recover its initial investment
B)The company's total margin will be less than its investment
C)It is a good investment
D)The break-even is lower than the 15,000 units that are expected to sell
E)All of these

Accepted Answer

The answer of You are hired as a consultant to...

Question 6

One methodology used to evaluate equipment investment decisions where the investment entails an initial investment,fixed costs,and variable costs is Break-Even Analysis.

Accepted Answer

Break-Even Analysis is a commonly used methodology to evaluate equipment investment decisions where the investment involves initial investment, fixed costs, and variable costs. The analysis helps to determine the minimum amount of revenue required to cover the costs of the investment and indicates at what point the investment will pay off, making it a useful tool for decision-making in any investment scenario.

Question 7

Break-Even Analysis can only be used in production equipment decision making when dealing solely with fixed costs,no variable costs.

Accepted Answer

Break-Even Analysis takes into consideration both fixed costs and variable costs in order to determine the production level needed to cover all costs and generate profit. Therefore, it can be used in production equipment decision making when considering both types of costs.

Question 8

In a workcenter,machine A has a ten minute set-up time per batch and a two minute per unit run time.Machine B performs the identical function but has a set-up time of thirty minutes and a one minute run time per unit.The workcenter makes products in batches ranging from one unit to one hundred units.Assuming capacity is not a limitation on either machine,on which batches should machine B be used?

A)All batches should be run on machine B
B)Batches of more than 20 units should be run on machine B
C)Batches of fewer than 80 units should be run on machine B
D)Batches with up to 50 units should be run on machine B
E)No batches should be run on machine B

Accepted Answer

The answer of In a workcenter,machine A has a ten...

Question 9

general purpose machine is less capable than a special purpose machine in certain tasks but can perform a broader variety of tasks.

Accepted Answer

A general purpose machine is designed to perform multiple tasks while a special purpose machine is designed for a specific task or set of tasks. While a special purpose machine may be more efficient in its specific task, it cannot perform a broader variety of tasks like a general purpose machine can.

Deck 6: A: Break-Even Analysis