Author Question: Fixed costs for a product are 50,000. The product itself sells for 5.00 and it costs 3.00 to make ... (Read 61 times)

sc00by25 · **on:** Jul 6, 2018

Fixed costs for a product are 50,000. The product itself sells for 5.00 and it costs 3.00 to make each product. What is the break-even point for the product?

A) 100,000
B) 10,000
C) 50,000
D) 25,000

Question 2

A company has a current ratio of 0.85 to 1. What should a manager in the company worry about?

A) The company has too many assets and is not using them efficiently.
B) The company has too much inventory.
C) The company may start to have trouble paying salaries.
D) The company is paying salaries that are too high.

nyrave · **Reply #1 on:** Jul 6, 2018

Answer to Question 1

Answer: D
Explanation: Plugging in the variables for the equation BE = TFC/(P - VC), you get BE = 50,000/(5 - 3), or 25,000 for BE. This means that the company must make 25,000 units of the product to begin making a profit.

Answer to Question 2

Answer: C
Explanation: A current ratio that is significantly less than 1.0 means that the company has too many liabilities relative to its assets. With this kind of liquidity problem, the company may experience difficulty in having enough cash to pay off its short-term obligationsthings such as taxes, accounts payable, and salaries.