Answered: The break-even point is the sales level…

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The break-even point is the sales level at which a company neither earns a profit nor incurs a loss True False

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 4DQ: A company accepts incremental business at a special price that exceeds the variable cost. What other...

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The break-even point is the sales level at which a company neither earns a profit nor incurs a loss

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A business that is below the operating break-even point: a) has positive operating profit b) has zero operating profit c) has negative operating profit d) operating profit cannot be calculated
Explain why a segment with an operating loss can cause the company to have a decrease in total operating income if the segment is dropped.
The margin of safety is the amount that sales can drop before the company incurs a loss True False
A company's break-even point will not be changed by: a change in the selling price per unit. a change in the income tax rate. a change in the variable cost per unit. a change in total fixed costs.
Break-Even Point AnalysisThe break-even point is usually expressed as the amount of revenue that must berealized for the firm (or product or activity or group of products or activities) to haveneither profit nor loss (that is, operating income equal to zero). The break-even pointis useful to managers because it expresses a minimum revenue target, and managersfrequently find it easier to think in terms of revenues rather than variable and fixedexpenses. In addition, the amount of sales (or revenues) generated by the firm is easilydetermined daily from the accounting system.The contribution margin model is used to determine the break-even point by setting operating income equal to zero and solving the model for the revenue or physicalsales volume that will cause that result. The calculation of break-even point in termsof units and total revenues is illustrated here:Selling price per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .…
The margin of safety can be defined as the amount by which sales can decrease beforelosses are incurred by the company.TRUEFALSE
PLEASE ANSWER ALL Write “True” if the statement is true and write “False” if the statement is false. The relevant range of activity is the activity level at which the company makes the highestamount profits. Fixed costs per unit decline as the activity level increase within the relevant range of activity. A period cost is defined as the cost incurred when asset is used up or sold for the purpose ofgenerating revenue. Opportunity costs could be defined as the revenue lost when one alternative is not taken infavor of another alternative.
A graphic depiction of the break-even point is known as a cost-volume-profit (CVP) chart whereby the area below the Total Revenues line and above the Total Costs line represents operating loss True False
true or false The smaller the contribution margin ratio, the larger the amount of sales required to cover a given amount of fixed expenses True False The margin of safety can be defined as the amount by which profit can decrease before losses are incurred by the company True False A big increase in sales will result in a small increase in profit if there is a low degree of operating leverage in a company True False
Explain how a shift in the sales mix could result in both a higher break-even point and a lower net operating income.
The amount by which a company's sales can decline before losses are incurred is called the:degree of operating leverage.margin of safety.profit loss.contribution margin ratio.
“Since break even analysis focuses on making Zero profit, it is of no value in determining the units a company must sell to earn a targeted profit”, Do you agree or disagree with this statement? Why or why not?