Use the figure for the question(s)below.
-The graph above shows the break-even analysis for the cost of making a certain good. Based on this chart, which of the following is true?
A)The project should not be undertaken if the predicted cost of goods sold is less than $110.
B)The net present value (NP
V)of the project increases with increased cost of goods sold.
C)If the good costs $110 to make, the net present value (NP
V)of the project will be zero.
D)The net present value (NP
V)of the project will be positive if the cost of goods sold is greater than $110.

Question

Use the figure for the question(s)below. 
-The graph above shows the break-even analysis for the cost of making a certain good. Based on this chart, which of the following is true?
A)The project should not be undertaken if the predicted cost of goods sold is less than $110. 
B)The net present value (NP
V)of the project increases with increased cost of goods sold. 
C)If the good costs $110 to make, the net present value (NP
V)of the project will be zero. 
D)The net present value (NP
V)of the project will be positive if the cost of goods sold is greater than $110.

Quizplus · Accepted Answer

The break-even point is where the cost of producing the good is equal to the revenue generated from selling it. At this point, the net present value (NPV) of the project will be zero because there is no profit or loss. Therefore, if the cost of the good is $110, the NPV will be zero. Any cost less than $110 will result in a negative NPV, indicating a loss, and any cost greater than $110 will result in a positive NPV, indicating a profit. Option A is incorrect because the break-even point is where the cost equals revenue, not where the predicted cost is less than $110. Option B is incorrect because the graph does not provide any information about the NPV increasing with increased cost of goods sold. Option D is incorrect because the graph does not provide any information about the specific value of the NPV for a cost greater than $110.

Use the Figure for the Question(s)below