Which of the following statements is true? 1. For a capital intensive, automated company the break-even point will tend to be higher and the margin of safety will be lower than for a less capital intensive company with the same sales. II. The total volume in sales dollars that would be required to attain a given target profit is determined by dividing the target profit by the contribution margin ratio. Multiple Choice O Only statement I is true. Only statement il is true. Both statements are true. Neither statement is true.

Which of the following statements is true? 1. For a capital intensive, automated company the break-even point will tend to be higher and the margin of safety will be lower than for a less capital intensive company with the same sales. II. The total volume in sales dollars that would be required to attain a given target profit is determined by dividing the target profit by the contribution margin ratio. Multiple Choice O Only statement I is true. Only statement il is true. Both statements are true. Neither statement is true.

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter13: Capital Structure And Leverage

Section: Chapter Questions

Problem 2Q: Would each of the following increase, decrease, or have an indeterminant effect on a firms...

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Would each of the following increase, decrease, or have an indeterminant effect on a firms break-even point (unit sales)? a. The sales price increases with no change in unit costs. b. An increase in fixed costs is accompanied by a decrease in variable costs. c. Variable labor costs decline; other things are held constant.
As a manager, you have to choose between two options for new production equipment. Machine A will increase fixed costs by a substantial margin but will produce greater sales volume at the current price. Machine B will only slightly increase fixed costs but will produce considerable savings on variable cost per unit. No additional sales are anticipated if Machine B is selected. What are the relative merits of both machines, and how could you go about analyzing which machine is the better investment for the company in terms of both net operating income and break-even?
If the sales mix in a multi-product environment shifts to a higher volume in low contribution margin products, the break-even point will ____________________________________ . A. remain unchanged because all products are included in the calculation of break-even B. increase because the low contribution margin products have little effect on break-even C. increase because the per composite unit contribution margin will decrease D. decrease because the per composite unit contribution margin will increase
The high-low method and least-squares regression are used by managers to _____________________. A. decide whether to make or buy a component part B. minimize corporate tax liability C. maximize output D. estimate costs
The use of fixed costs to extract higher percentage changes in profits as sales activity changes involves a. margin of safety. b. unit contribution margin. c. degree of operating leverage. d. sensitivity analysis. e. variable cost reduction.
When sales price increases and all other variables are held constant, the break-even point will A. remain unchanged _________________________. B. increase C. decrease D. produce a lower contribution margin
Is my explanation correct? When the shit in sales toward the lower contribution margin. In the sales mix, if the shift in sales to a product that has a low contribution margin ratio, the break-even point will increase. In this case, the company will generate more sales; hence, the net operating income will increase. Also, the contribution margin ratio will increase. Moreover, the degree of operating leverage will increase, too. Please explain (True or False) in detail.
Which of the following statements is true? A In linear break-even analysis, the contribution margin is the difference between the selling price and the average fixed cost. B The Theory of the Business Firm assumes perfect market competition. This means it assumes that the selling price decreases as a firm's production rate increases. C In the Theory of the Business Firm, profits per period are maximized at the production rate at which marginal cost equals average cost. D In the Theory of the Business Firm, profits per period are maximized at the production rate at which average cost is minimized. E All four statements are false.
You are analyzing Becker Corporation and Newton Corporation and have concluded that Becker has a higher operating leverage factor than Newton. Which one of the following choices correctly depicts (1) the relative use of fixed costs (as opposed to variable costs) for the two companies and (2) the percentage change in income caused by a change in sales? (1) Lower for Becker (2)Lower for Becker (1) Greater for Becker (2) Greater for Becker (1) Greater for Becker (2) Equal for both (1) Lower for Becker (2) Greater for Becker (1) Greater for Becker (2) Lower for Becker
Each of a company's two product lines has a different contribution margin ratio . If the company's total sales remain the same but the sales mix shifts toward selling more of the product with the higher contribution ratio , which of the following is true ? O a Fixed cost will be constant . . the breakeven point will decrease . Ocall of the answers are true . d the average contribution margin ratio will increase . O e operating income will increase
Which of the following is true regarding the contribution margin ratio of a company that produces only a single product? Select one: a. The contribution margin ratio equals the selling price per unit less the variable expense ratio. b. The contribution margin per unit multiplied by the selling price per unit equals the contribution margin ratio. c. None of the given answer is correct. d. As fixed expenses decrease, the contribution margin ratio increases. e. The contribution margin ratio will decline as unit sales decline.
Which of the following costs are always incremental and relevant in decision analysis? a) Opportunity costs and sunk costs b) Avoidable costs and opportunity costs c) Only avoidable costs d) Avoidable costs and sunk costs Which of the following will increase a company's breakeven point? a) reducing its total fixed costs b) increasing the selling price per unit c) increasing variable cost per unit d) increasing contribution margin per unit