Deck 6: A: Break-Even Analysis

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

Answer 1

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

Answer 2

C

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.

Answer 3

True

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

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

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.

Question 7

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

Question 9

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