Would each of the following increase, decrease, or have an indeterminant effect on a firm’sbreak-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. A new firm decides to use MACRS depreciation for both book and tax purposes ratherthan the straight-line depreciation method.d. Variable labor costs decline; other things are held constant.

Would each of the following increase, decrease, or have an indeterminant effect on a firm’sbreak-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. A new firm decides to use MACRS depreciation for both book and tax purposes ratherthan the straight-line depreciation method.d. Variable labor costs decline; other things are held constant.

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.
Suppose you are analyzing a firm that is successfully executing a strategy that differentiates its products from those of its competitors. Because of this strategy, you project that next year the firm will generate 6.0% revenue growth from price increases and 3.0% revenue growth from sales volume increases. Assume that the firms production cost structure involves strictly variable costs. (That is, the cost to produce each unit of product remains the same.) Should you project that the firms gross profit will increase next year? If you project that the gross profit will increase, is the increase a result of volume growth, price growth, or both? Should you project that the firms gross profit margin (gross profit divided by sales) will increase next year? If you project that the gross profit margin will increase, is the increase a result of volume growth, price growth, or both?
If the percentage change in operating income resulting from a given percentagechange in sales is higher than the percentage change in sales itself, thena. an increase in the selling price would not alter the contribution marginper unit.b. variable costs per unit have increased.c. variable costs have decreased in total.d. the company has operating leverage.e. the company has no fixed costs.
For an enterprise, when at least one input is held constant while other inputs are increased, there will be an eventual decline in the rate of extra output or yieldage, making continued expansion unprofitable.” This is known as the a. law of increased returns to scale. b. law of cause and effect. c. law of increased relative cost. d. law of diminishing returns.
XYZ Company wishes to gain more market share . In order to do that , the company is planning to double the current production and sales quantity . However , due to increase in production capacity , the fixed cost is also expected to double . Assuming that the selling price per unit and the variable cost per unit remain unchanged , what would be the effect on profit ? a. Cannot be determined using the information in the question . b. None of the given answers c. Profit would increase d. Profit would decrease e. Profit would remain unchanged
If XYZ Company sells unit outputs that exceed the breakeven point, a. there will be an increase in total fixed costs b. total sales revenue will exceed total variable costs total sales revenue will exceed total fixed costs dthere will be a profit e None of the given answers
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
A company can lower its break-even point by any of the following except by: Question 4Answer a. reducing its total fixed expenses b. increasing the selling price per unit c. increasing production d. increasing contribution margin
What affects the firm’s operating break-even point? Several factors affect a firm’s operating break-even point. Based on the scenarios described in the following table, indicate whether these factors would increase, decrease, or leave unchanged a firm’s break-even quantity—assuming that only the listed factor changes and all other relevant factors remain constant. Increase Decrease No Change The product’s sales price increases. The amount of debt increases, causing the firm’s total interest expense to increase. The firm’s fixed costs increase. When fixed costs are high, a small decline in sales can lead to a decline in return on invested capital (ROI).
Which of the following is not one of the benefits of breakeven analysis to businesses?A. Determining the lowest selling priceB. Choosing the most profitable product typesC. Determination of firm valueD. Differentiation of fixed variable expensesE. Conducting decline in sales analysis
What will happen to a company’s break-even point if the sales price and unit variable cost of its only product increase by the same dollar amount?