Question 1

Breakeven analysis is normally performed for a planning period of ____.

Accepted Answer

A)  one month 
B)  one year or less 
C)  five years 
D)  ten years 
A)  one month 
B)  one year or less 
C)  five years 
D)  ten years B

Question 2

An example of a noncash outlay is ____.

Accepted Answer

A)  property 
B)  marketing costs 
C)  advertising 
D)  depreciation 
A)  property 
B)  marketing costs 
C)  advertising 
D)  depreciation D

Question 3

Kettle of Fish Hatcheries provides a stocked pond for fishing enthusiasts. They have fixed costs of $525,000, they charge $50 per person for pond access, and the variable costs of stocking the pond average about $15 per person. How many people need to fish the pond annually to break even?

Accepted Answer

A)  45,000 
B)  15,000 
C)  32,000 
D)  10,000 
A)  45,000 
B)  15,000 
C)  32,000 
D)  10,000 B

Question 4

Bouncy Bungee Rubber Band Company has fixed costs of $2,760,000 per year, it sells its rubber bands for $3.75 per pack, and the variable cost of these packs is $0.75. They estimate they will sell 1,000,000 packs this year, with a standard deviation of 40,000 units. Find the probability of the company incurring a loss. (A normal distribution table, for example, Table V from the text, must accompany this problem.)

Accepted Answer

A)  3.22% 
B)  6.71% 
C)  5.48% 
D)  2.87% 
A)  3.22% 
B)  6.71% 
C)  5.48% 
D)  2.87%

Question 5

What is the breakeven point, in dollars, for Zippy Dippy Swimwear, maker of bathing suits and accessories? It has the following costs: $\begin{array}{ll}
\text { Raw materials: } & \$ 25 \text { per bathing suit } \
& \$ 8 \text { per towel } \
& \$ 16 \text { per beach umbrella } \
& \$ 37 \text { per swimsuit cover-up }\
\text { Labor costs: } & \$ 18 \text { average per suit } \
& \$ 10 \text { per umbrella } \
& \$ 3 \text { per towel } \
& \$ 20 \text { per cover-up }\
\text { Commissions: } & \$ 12 \text { per item } \
\text { Utilities: } & \$ 150,000 \
\text { Rent: } & \$ 196,000 \
\text { Taxes: } & \$ 230,000 \
\text { Salaries: } & \$ 550,000
\end{array}$  The price of each suit is $85. The price of each towel is $25.
The price of each umbrella is $40.
The price of each cover-up is $81.

Accepted Answer

A)  $3,172,023 
B)  $4,947,196 
C)  $7,887,259 
D)  $6,425,583 
A)  $3,172,023 
B)  $4,947,196 
C)  $7,887,259 
D)  $6,425,583

Question 6

Explain the composition of operating costs and why they can cause an inaccurate breakeven analysis.

Accepted Answer

Breakeven analysis assumes that costs ca

Question 7

What is the breakeven point for Rough and Tough Clothiers, maker of heavy-duty dungarees? It has the following costs: $$\begin{array} { l l } 
\text { Raw materials: } & \$ 15 \text { per pair } \
\text { Labor costs: } & \$ 8 \text { per pair } \
\text { Commissions: } & \$ 2 \text { per pair } \
\text { Utilities: } & \$ 50,000 \
\text { Rent: } & \$ 96,000 \
\text { Taxes: } & \$ 30,000 \
\text { Salaries: } & \$ 150,000
\end{array}$$ The price of the dungarees is $55 per pair.

Accepted Answer

A)  13,040 
B)  10,867 
C)  25,000 
D)  17,650 
A)  13,040 
B)  10,867 
C)  25,000 
D)  17,650

Question 8

The uses of breakeven analysis includes all except which of the following?

Accepted Answer

A)  Forecasting the profitability of the firm 
B)  Forecasting the impact of certain economic conditions on the firm's profitability 
C)  Analyzing the impact of substituting fixed costs for variable costs in production 
D)  Analyzing the profit impact of a firm's restructuring efforts 
A)  Forecasting the profitability of the firm 
B)  Forecasting the impact of certain economic conditions on the firm's profitability 
C)  Analyzing the impact of substituting fixed costs for variable costs in production 
D)  Analyzing the profit impact of a firm's restructuring efforts

Question 9

The Fanny Nanny Weight Monitors Corporation offers an annual diet plans for sale each year with information about nutrition, diet tips, and food substitutes. The finished product sells for $60, with a variable cost per unit of $27. The company has fixed operating costs of $1,250,000. What is its breakeven point?

Accepted Answer

A)  22,187 
B)  37,879 
C)  56,124 
D)  48,961 
A)  22,187 
B)  37,879 
C)  56,124 
D)  48,961

Question 10

The breakeven point occurs where total revenues intersect with ____.

Accepted Answer

A)  market returns 
B)  the risk-free rate 
C)  total costs 
D)  total interest and taxes 
A)  market returns 
B)  the risk-free rate 
C)  total costs 
D)  total interest and taxes

Question 11

In a graphic breakeven analysis, the point where total revenue is less than total cost indicates the firm has ____.

Accepted Answer

A)  net operating capital 
B)  cash flow from investing 
C)  a negative EBIT 
D)  a positive return on capital 
A)  net operating capital 
B)  cash flow from investing 
C)  a negative EBIT 
D)  a positive return on capital

Question 12

The Foggy Futures Weather Network offers an annual almanac for sale each year with information about predicted weather patterns, severe storm safety tips and a tracking chart. The finished product sells for $35, with a variable cost per unit of $21. The company has operating costs of $1,050,000. What is the probability of the firm having operating losses if the firm expects to sell 80,000 almanacs, with a standard deviation of 4,000 units? (A normal distribution table, for example, Table V from the text, must accompany this problem.)

Accepted Answer

A)  10.56% 
B)  11.12% 
C)  14.92% 
D)  13.57% 
A)  10.56% 
B)  11.12% 
C)  14.92% 
D)  13.57%

Question 13

Breakeven analysis can be used when planning ____.

Accepted Answer

A)  renovations 
B)  expansions 
C)  financial resources 
D)  new product development 
A)  renovations 
B)  expansions 
C)  financial resources 
D)  new product development

Question 14

Breakeven analysis can be used to assess ____ risk.

Accepted Answer

A)  financial 
B)  operating 
C)  sales 
D)  volume 
A)  financial 
B)  operating 
C)  sales 
D)  volume

Question 15

The Foggy Futures Weather Network offers an annual almanac for sale each year with information about predicted weather patterns, severe storm safety tips, and a tracking chart. The finished product sells for $35, with a variable cost per unit of $21. The company has operating costs of $1,050,000. What is the firm's breakeven point in units?

Accepted Answer

A)  75,000 
B)  50,000 
C)  80,000 
D)  65,000 
A)  75,000 
B)  50,000 
C)  80,000 
D)  65,000

Question 16

How can a firm have more than one breakeven output point?

Accepted Answer

When considering the breakeven analysis

Question 17

The Foggy Futures Weather Network offers an annual almanac for sale each year with information about predicted weather patterns, severe storm safety tips, and a tracking chart. The finished product sells for $35, with a variable cost per unit of $21. The company has operating costs of $1,050,000. The company has operating costs of $1,050,000. What is the firm's breakeven point in dollars?

Accepted Answer

A)  $1,750,000 
B)  $4,670,000 
C)  $2,625,000 
D)  $3,875,566 
A)  $1,750,000 
B)  $4,670,000 
C)  $2,625,000 
D)  $3,875,566

Question 18

Another name for breakeven analysis is ____.

Accepted Answer

A)  cost-volume-profit analysis 
B)  graphic analysis 
C)  EBIT-EPS analysis 
D)  degree of operating leverage 
A)  cost-volume-profit analysis 
B)  graphic analysis 
C)  EBIT-EPS analysis 
D)  degree of operating leverage

Question 19

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

Accepted Answer

A)  to the bottom line 
B)  to revenue 
C)  margin 
D)  to EBIT 
A)  to the bottom line 
B)  to revenue 
C)  margin 
D)  to EBIT

Question 20

The contribution margin per unit is the difference between the ____.

Accepted Answer

A)  selling price per unit and fixed costs 
B)  fixed costs and the variable costs 
C)  selling price per unit and the variable cost per unit 
D)  variable costs and the number of units sold 
A)  selling price per unit and fixed costs 
B)  fixed costs and the variable costs 
C)  selling price per unit and the variable cost per unit 
D)  variable costs and the number of units sold

Breakeven analysis is normally performed for a planning period of ____.

An example of a noncash outlay is ____.

Kettle of Fish Hatcheries provides a stocked pond for fishing enthusiasts. They have fixed costs of $525,000, they charge $50 per person for pond access, and the variable costs of stocking the pond average about $15 per person. How many people need to fish the pond annually to break even?

Explain the composition of operating costs and why they can cause an inaccurate breakeven analysis.

The uses of breakeven analysis includes all except which of the following?

The breakeven point occurs where total revenues intersect with ____.

In a graphic breakeven analysis, the point where total revenue is less than total cost indicates the firm has ____.

Breakeven analysis can be used when planning ____.

Breakeven analysis can be used to assess ____ risk.

How can a firm have more than one breakeven output point?

Another name for breakeven analysis is ____.

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

The contribution margin per unit is the difference between the ____.

The Role and Objective of Financial Management

The Domestic and International Financial Marketplace

Evaluation of Financial Performance

Financial Planning and Forecasting

The Time Value of Money

Continuous Compounding and Discounting

Fixed Income Securities: Characteristics and Valuation

Common Stock: Characteristics, Valuation, and Issuance

Analysis of Risk and Return

Capital Budgeting and Cash Flow Analysis

Mutually Exclusive Investments Having Unequal Lives

Capital Budgeting: Decision Criteria and Real Option Considerations

Capital Budgeting and Risk

The Cost of Capital

Capital Structure Concepts

Capital Structure Management in Practice

Dividend Policy

Working Capital Policy and Short-Term Financing

The Management of Cash and Marketable Securities

The Management of Accounts Receivable and Inventories

Lease and Intermediate Term Financing

Financing With Derivatives

Bond Refunding Analysis

Risk Management

International Financial Management

Corporate Restructuring

Filters

Exam 16: Breakeven Analysis

Breakeven analysis is normally performed for a planning period of ____.

An example of a noncash outlay is ____.

Kettle of Fish Hatcheries provides a stocked pond for fishing enthusiasts. They have fixed costs of $525,000, they charge $50 per person for pond access, and the variable costs of stocking the pond average about $15 per person. How many people need to fish the pond annually to break even?

Explain the composition of operating costs and why they can cause an inaccurate breakeven analysis.

The uses of breakeven analysis includes all except which of the following?

The breakeven point occurs where total revenues intersect with ____.

In a graphic breakeven analysis, the point where total revenue is less than total cost indicates the firm has ____.

Breakeven analysis can be used when planning ____.

Breakeven analysis can be used to assess ____ risk.

How can a firm have more than one breakeven output point?

Another name for breakeven analysis is ____.

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

The contribution margin per unit is the difference between the ____.

The Role and Objective of Financial Management

The Domestic and International Financial Marketplace

Evaluation of Financial Performance

Financial Planning and Forecasting

The Time Value of Money

Continuous Compounding and Discounting

Fixed Income Securities: Characteristics and Valuation

Common Stock: Characteristics, Valuation, and Issuance

Analysis of Risk and Return

Capital Budgeting and Cash Flow Analysis

Mutually Exclusive Investments Having Unequal Lives

Capital Budgeting: Decision Criteria and Real Option Considerations

Capital Budgeting and Risk

The Cost of Capital

Capital Structure Concepts

Capital Structure Management in Practice

Dividend Policy

Working Capital Policy and Short-Term Financing

The Management of Cash and Marketable Securities

The Management of Accounts Receivable and Inventories

Lease and Intermediate Term Financing

Financing With Derivatives

Bond Refunding Analysis

Risk Management

International Financial Management

Corporate Restructuring

Filters