Appendix: Breakeven Analysis

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Questions Bank

The Role and Objective of Financial Management
The Domestic and International Financial Marketplace
Evaluation of Financial Performance
Financial Planning and Forecasting
The Time Value of Money
Fixed Income Securities: Characteristics and Valuation
Common Stock: Characteristics, Valuation, and Issuance
Analysis of Risk and Return
Capital Budgeting and Cash Flow Analysis
Capital Budgeting: Decision Criteria and Real Option Considerations
Capital Budgeting and Risk
The Cost of Capital
Capital Structure Concepts
Capital Structure Management in Practice
Dividend Policy
Working Capital Policy and Short-term Financing
The Management of Cash and Marketable Securities
Management of Accounts Receivable and Inventories
Lease and Intermediate-term Financing
Financing With Derivatives
Risk Management
International Financial Management
Corporate Restructuring
Appendix: Continuous Compounding and Discounting
Appendix: Mutually Exclusive Investments Having Unequal Lives
Appendix: Breakeven Analysis
Appendix: Bond Refunding Analysis
Appendix: Taxes

All Questions

Question 1

Free

Multiple Choice

The breakeven point occurs where total revenues intersect with:

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market returns

the risk-free rate

total costs

total interest and taxes

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Question 2

Free

Multiple Choice

Breakeven analysis is normally performed for a planning period of:

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five years

one year or less

ten years

one month

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Question 3

Free

Multiple Choice

An example of a noncash outlay is:

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property

marketing costs

advertising

depreciation

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Question 4

Free

Multiple Choice

Breakeven analysis can be used to assess ____ risk.

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financial

operating

sales

volume

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Question 5

Free

Multiple Choice

Breakeven analysis can be used:

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when planning renovations

when planning expansions

when planning financial resources

when planning new product development

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Question 6

Multiple Choice

The uses of breakeven analysis are all of the following EXCEPT:

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forecasting the profitability of the firm

forecasting the impact of certain economic conditions on the firm's profitability

analyzing the impact of substituting fixed costs for variable costs in production

analyzing the profit impact of a firm's restructuring efforts.

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Question 7

Multiple Choice

The difference between the selling price per unit and the variable cost per unit is the:

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contribution to the bottom line

contribution to revenue

contribution margin

contribution to EBIT

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Question 8

Multiple Choice

Another name for breakeven analysis is:

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cost-volume-profit analysis

graphic analysis

EBIT-EPS analysis

degree of operating leverage

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Question 9

Multiple Choice

In a graphic breakeven analysis, the point where total revenue is less than total cost indicates that the firm has:

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net operating capital

cash flow from investing

a negative EBIT

a positive return on capital

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Question 10

Multiple Choice

The contribution margin per unit is the difference between:

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the selling price per unit and fixed costs

the fixed costs and the variable costs

the variable cost per unit and the selling price per unit

the variable costs and the number of units sold

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Question 11

Multiple Choice

The Foggy Futures Weather Network offers an annual almanac for sale each year with information about predicted weather patterns, severe storm safety tips and a tracking chart. The finished product sells for $35 with a variable cost per unit of $21. The company has operating costs of $1,050,000. What is the firm's breakeven point in units?

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75,000

50,000

80,000

65,000

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Question 12

Multiple Choice

The Foggy Futures Weather Network offers an annual almanac for sale each year with information about predicted weather patterns, severe storm safety tips and a tracking chart. The finished product sells for $35 with a variable cost per unit of $21. The company has operating costs of $1,050,000. The company has operating costs of $1,050,000. What is the firm's breakeven point in dollars?

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$1,750,000

$4,670,000

$2,625,000

$3,875,566

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Question 13

Multiple Choice

The Foggy Futures Weather Network offers an annual almanac for sale each year with information about predicted weather patterns, severe storm safety tips and a tracking chart. The finished product sells for $35 with a variable cost per unit of $21. The company has operating costs of $1,050,000. Using 100,000 units as a base, what is the degree of operating leverage?

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6.2

5.7

7.9

4.0

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Question 14

Multiple Choice

The Foggy Futures Weather Network offers an annual almanac for sale each year with information about predicted weather patterns, severe storm safety tips and a tracking chart. The finished product sells for $35 with a variable cost per unit of $21. The company has operating costs of $1,050,000. What is the probability of the firm having operating losses if the firm has a standard deviation of 4,000 units and the firm expects to sell 80,000 almanacs? (A normal distribution table - Table V - must accompany this problem)

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10.56%

11.12%

14.92%

13.57%

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Question 15

Multiple Choice

Bouncy Bungee Rubber Band Company is trying to determine its probability of incurring a loss. Its fixed costs are $2,760,000 per year, it sells its rubber bands for $3.75 per pack and the variable cost of these packs is $.75. They estimate they will sell 1,000,000 packs this year and they have a standard deviation of 40,000 units. (A normal distribution table - Table V - must accompany this problem).

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3.22%

6.71%

5.48%

2.87%

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Question 16

Multiple Choice

Kettle of Fish Hatcheries provides a stocked pond for fishing enthusiasts. They have fixed costs of $525,000, they charge $50 per person for pond access and the variable costs of stocking the pond average about $15 per person. How many people need to fish the pond annually to break even?

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45,000

15,000

32,000

10,000

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Question 17

Multiple Choice

What is the breakeven point for Rough and Tough Clothiers, makers of heavy duty dungarees? They have the following costs:
The price of the dungarees is $55 per pair.

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13,040

10,867

25,000

17,650

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Question 18

Multiple Choice

The Fanny Nanny Weight Monitors Corporation offers an annual diet plans for sale each year with information about nutrition, diet tips and food substitutes. The finished product sells for $60 with a variable cost per unit of $27. The company has fixed operating costs of $1,250,000. What is its breakeven point?

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22,187

37,879

56,124

48,961

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Question 19

Multiple Choice

What is the breakeven point in dollars for Zippy Dippy Swimwear, makers of bathing suits and accessories? They have the following costs:
The price of each suit is $85.
The price of each towel is $25.
The price of each umbrella is $40.
The price of each cover-up is $81.

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$3,172,024

$4,947,196

$7,887,259

$6,425,583

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Question 20

Essay

What are the possible uses for breakeven analysis?

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Appendix: Breakeven Analysis

The breakeven point occurs where total revenues intersect with:

Breakeven analysis is normally performed for a planning period of:

An example of a noncash outlay is:

Breakeven analysis can be used to assess ____ risk.

Breakeven analysis can be used:

The uses of breakeven analysis are all of the following EXCEPT:

The difference between the selling price per unit and the variable cost per unit is the:

Another name for breakeven analysis is:

In a graphic breakeven analysis, the point where total revenue is less than total cost indicates that the firm has:

The contribution margin per unit is the difference between:

Kettle of Fish Hatcheries provides a stocked pond for fishing enthusiasts. They have fixed costs of $525,000, they charge $50 per person for pond access and the variable costs of stocking the pond average about $15 per person. How many people need to fish the pond annually to break even?

What is the breakeven point for Rough and Tough Clothiers, makers of heavy duty dungarees? They have the following costs: The price of the dungarees is $55 per pair.

What is the breakeven point in dollars for Zippy Dippy Swimwear, makers of bathing suits and accessories? They have the following costs: The price of each suit is $85.The price of each towel is $25.The price of each umbrella is $40.The price of each cover-up is $81.

What are the possible uses for breakeven analysis?

What is the breakeven point for Rough and Tough Clothiers, makers of heavy duty dungarees? They have the following costs:
The price of the dungarees is $55 per pair.

What is the breakeven point in dollars for Zippy Dippy Swimwear, makers of bathing suits and accessories? They have the following costs:
The price of each suit is $85.
The price of each towel is $25.
The price of each umbrella is $40.
The price of each cover-up is $81.