Foundations Of Finance
10th Edition
ISBN: 9780134897264
Author: KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher: Pearson,
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Chapter 12, Problem 5RQ
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To discuss: The short comings in employing break even analysis.
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Which of the following is not an assumption underlying cost-volume-profit analysis?
a.The break-even point will be passed during the period.
b.Total sales and total costs can be represented by straight lines.
c.Costs can be accurately divided into fixed and variable components.
d.The sales mix is constant.
Which of the following is not an assumption underlying cost-volume-profit analysis?a. The sales mix is constant.b. The break-even point will be passed during the period.c. Total sales and total costs can be represented by straight lines.d. Costs can be accurately divided into fixed and variable components.
If only the selling price per unit of a product increases (variable cost per unit and total fixed costs do not change), does the breakeven point increase or decrease? Using Break Even Analysis, provide a unique mathematical example to support you
Chapter 12 Solutions
Foundations Of Finance
Ch. 12 - Prob. 1RQCh. 12 - Prob. 3RQCh. 12 - Prob. 4RQCh. 12 - Prob. 5RQCh. 12 - Prob. 1SPCh. 12 - Prob. 2SPCh. 12 - Prob. 3SPCh. 12 - Prob. 4SPCh. 12 - Prob. 5SPCh. 12 - (Capital structure theory) Match each of the...
Ch. 12 - (Capital structure theory) Which of the following...Ch. 12 - Prob. 8SPCh. 12 - Prob. 9SPCh. 12 - (Assessing leverage use) Financial data for three...Ch. 12 - Prob. 1.1MCCh. 12 - Prob. 1.2MCCh. 12 - Prob. 1.3MCCh. 12 - Prob. 1.4MCCh. 12 - Prob. 2.1MCCh. 12 - Prob. 2.2MCCh. 12 - Prob. 2.3MCCh. 12 - Prob. 3.1MCCh. 12 - Prob. 3.2MCCh. 12 - Prob. 3.3MC
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- 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 increasearrow_forwardWould 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.arrow_forwardThe 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.arrow_forward
- In a cost-volume-profit analysis, explain what happens at the break-even point and why companies do not want to remain at the break-even point.arrow_forwardExplain how a shift in the sales mix could result in both a higher break-even point and a lower net operating income.arrow_forwardBreak-even analysis is one type of cost-volume-profit analysis. © True O Falsearrow_forward
- Is this statement true or false? Can you please explain in detail. There is a difference between the theoretical production capacity and the actual output as demand fluctuates, resulting in differences in standardised cost price per unitarrow_forwardBriefly explain the impact of each of the following scenarios on the break-even point and the margin of safety: Increase in sales volume Increase in total fixed costs Increase in selling price per unit Decrease in variable costs per unitarrow_forwardBreak-even analysis assumes that: Multiple Choice Total revenue is constant. Unit variable expense is constant. Selling prices must fall in order to generate more revenue.arrow_forward
- Would an increase in variable costs per unit cause a company’s break-even point to increase or decrease? Why?arrow_forwardIn the cost-volume-profit analysis, income taxes a.increase the sales volume required to break even. b.are treated as a variable cost. c.are treated as a fixed cost. d.increase the sales volume required to earn a desired profit.arrow_forwardWhich one of the following is not an assumption of CVP analysis? The behavior of costs and revenues are linear within the relevant range. Sales mix remains constant. All units produced are sold. All costs are variable costs.arrow_forward
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