Author Question: In a short essay, explain how the break-even point (BE) changes with variables TFC (total fixed ... (Read 73 times)

jasdeep_brar · **on:** Jul 6, 2018

In a short essay, explain how the break-even point (BE) changes with variables TFC (total fixed costs), P (unit price), and VC (variable cost per unit).

What will be an ideal response?

Question 2

In a short essay, explain how managers can use current value for making organizational decisions.

What will be an ideal response?

FergA · **Reply #1 on:** Jul 6, 2018

Answer to Question 1

Answer: According to the equation BE = TFC/(P - VC), when TFC increases, BE, the break-even point, also increases, requiring more units to be sold for the product to make a profit. Increasing P increases the value of the denominator in the equation, which results in the value of BE dropping. Finally, increasing VC decreases the value of the denominator in the equation, which results in the value of BE increasing.

Answer to Question 2

Answer: Current value is calculated by finding the ratio of a company's current assets to its current liabilities. A current ratio that is significantly greater than 2:1 suggests that the company is asset-heavy and is not receiving the best return possible on the assets it has. A current ratio of less than 1:1 suggests that the company has too many liabilities and may soon have trouble meeting its short-term obligations, such as payroll, and paying taxes.