Question 1
Which of the following costs would be incurred even if no units were produced?
◦ purchasing costs
◦ raw material costs
◦ direct labour costs
◦ transportation costs
◦ building rental costs
Question 2
Basic break-even analysis typically assumes that
◦ costs increase in direct proportion to the volume of production, while revenues increase at a decreasing rate as production volume increases because of the need to give quantity discounts.
◦ variable costs and revenues increase in direct proportion to the volume of production.
◦ both costs and revenues are made up of fixed and variable portions.
◦ revenues increase in direct proportion to the volume of production, while costs increase at a decreasing rate as production volume increases.
◦ All of the above are assumptions in the basic break-even model.
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