Author Question: Fixed costs for a product are 60,000. The product itself sells for 4.00 and it costs 1.00 to make ... (Read 83 times)

jman1234

  • Hero Member
  • *****
  • Posts: 560
Fixed costs for a product are 60,000. The product itself sells for 4.00 and it costs 1.00 to make each product. How will the break-even point for the product change if the variable cost per unit goes up to 1.50?
 
  A) The break-even point will increase by 4000.
  B) The break-even point will increase by 24,000.
  C) The break-even point will decrease by 4000.
  D) The break-even point will increase by 20,000.

Question 2

Fixed costs for a product are 30,000. The product itself sells for 3.00 and it costs 1.50 to make each product. How can the plant decrease the break-even point by 5000 units?
 
  A) Increase P, the price of the item, by 0.50.
  B) Increase TFC, the fixed costs for item, by 5000.
  C) Decrease P, the price of the item, by 0.50.
  D) Decrease TFC, the fixed costs for item, by 5000.



ashely1112

  • Sr. Member
  • ****
  • Posts: 347
Answer to Question 1

Answer: A
Explanation: Plugging in the variables for the original break-even point, BE = TFC/(P - VC), you get BE = 60,000/(4 - 1), or 20,000 for BE. Changing the value of VC gives BE = 60,000/(4 - 1.50), or 24,000 for BE. Therefore, the value of BE increases from 20,000 to 24,000, or 4000.

Answer to Question 2

Answer: A
Explanation: Plugging in the variables for the original break-even point, BE = TFC/(P - VC), you get BE = 30,000/(3 - 1.50), or 20,000 for BE. Changing the value of P by 50 cents gives BE = 30,000/(3.50 - 1.50), or 15,000 for BE, giving a break-even point that is 5000 lower than the original break-even point.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

Pope Sylvester II tried to introduce Arabic numbers into Europe between the years 999 and 1003, but their use did not catch on for a few more centuries, and Roman numerals continued to be the primary number system.

Did you know?

Throughout history, plants containing cardiac steroids have been used as heart drugs and as poisons (e.g., in arrows used in combat), emetics, and diuretics.

Did you know?

A good example of polar molecules can be understood when trying to make a cake. If water and oil are required, they will not mix together. If you put them into a measuring cup, the oil will rise to the top while the water remains on the bottom.

Did you know?

The Romans did not use numerals to indicate fractions but instead used words to indicate parts of a whole.

Did you know?

Autoimmune diseases occur when the immune system destroys its own healthy tissues. When this occurs, white blood cells cannot distinguish between pathogens and normal cells.

For a complete list of videos, visit our video library