Gr 11 Math Lit: Ch 3.10 Break Even Analysis
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Questions and Answers

What is the break-even quantity formula?

  • $$\frac{\text{Fixed Costs}}{\text{Variable Cost per Unit}}$$
  • $$\frac{\text{Fixed Costs}}{\text{Selling Price per Unit} - \text{Variable Cost per Unit}}$$ (correct)
  • $$\frac{\text{Variable Cost per Unit}}{\text{Selling Price per Unit} - \text{Variable Cost per Unit}}$$
  • $$\frac{\text{Selling Price per Unit}}{\text{Fixed Costs} - \text{Variable Cost per Unit}}$$

    • What is the formula to calculate the total cost?

  • $$\text{Total Cost} = \text{Fixed Costs} + (\text{Variable Cost per Unit} \times \text{Number of Units Sold})$$ (correct)
  • $$\text{Total Cost} = \text{Fixed Costs} \times \text{Number of Units Sold}$$
  • $$\text{Total Cost} = \text{Variable Cost per Unit} - \text{Number of Units Sold}$$
  • $$\text{Total Cost} = \text{Fixed Costs} - (\text{Variable Cost per Unit} \times \text{Number of Units Sold})$$

    • What is the break-even income?

  • The variable cost per unit at the break-even quantity
  • The total revenue at the break-even quantity (correct)
  • The total cost at the break-even quantity
  • The selling price per unit at the break-even quantity

    • What is the formula to calculate the income?

    <p>$$\text{Income} = \text{Selling Price per Unit} \times \text{Number of Units Sold}$$</p> Signup and view all the answers

    What is the purpose of calculating the break-even quantity?

    <p>To determine the number of units that must be sold to cover all costs</p> Signup and view all the answers

    What are the two components of total cost?

    <p>Fixed costs and variable costs</p> Signup and view all the answers

    What is the break-even point in a business context?

    <p>The point where the business's income equals its total expenses</p> Signup and view all the answers

    What does the horizontal axis value in the graphical representation of break-even point represent?

    <p>The quantity of items sold</p> Signup and view all the answers

    What is the first step in the graph method to determine the break-even value?

    <p>Draw two graphs: one for total costs and one for total income</p> Signup and view all the answers

    What is the formula for the income equation in break-even analysis?

    <p>Income = Selling Price per Unit × Number of Units Sold</p> Signup and view all the answers

    What is the purpose of the trial and improvement method in break-even analysis?

    <p>To find the exact break-even point by iteratively adjusting values</p> Signup and view all the answers

    What is the variable cost per unit multiplied by in the cost equation?

    <p>Number of units sold</p> Signup and view all the answers

    What is the benefit of determining the break-even point in a business?

    <p>It helps to determine the point where the business avoids a loss and starts making a profit</p> Signup and view all the answers

    What is the graphical representation of the break-even point?

    <p>The intersection of the total cost and total income graphs</p> Signup and view all the answers

    What is the result of solving the income equation equal to the cost equation?

    <p>The break-even quantity.</p> Signup and view all the answers

    What happens to the total cost when the number of units sold increases?

    <p>It increases.</p> Signup and view all the answers

    What is the difference between the selling price per unit and the variable cost per unit in the break-even point calculation?

    <p>Contribution margin.</p> Signup and view all the answers

    What is the relationship between the break-even quantity and the fixed costs?

    <p>The break-even quantity is inversely proportional to the fixed costs.</p> Signup and view all the answers

    What happens to the break-even quantity if the selling price per unit increases?

    <p>It decreases.</p> Signup and view all the answers

    What is the significance of the break-even quantity in a business?

    <p>It is the quantity at which the business breaks even.</p> Signup and view all the answers

    What is the primary importance of determining the break-even point in a business?

    <p>To avoid a loss and start making a profit</p> Signup and view all the answers

    Outside of a business context, what does the break-even point refer to?

    <p>The values for which two things are equal</p> Signup and view all the answers

    What is the graphical representation of the break-even point?

    <p>The intersection of two graphs: one representing costs and the other representing income</p> Signup and view all the answers

    What is the main difference between the graphical method and the trial and improvement method of determining the break-even point?

    <p>The graphical method uses graphs, while the trial and improvement method uses equations</p> Signup and view all the answers

    What is the purpose of using the trial and improvement method in break-even analysis?

    <p>To determine the exact break-even point</p> Signup and view all the answers

    What is the relationship between the break-even point and the business's income?

    <p>The break-even point is the minimum income a business must make to avoid a loss</p> Signup and view all the answers

    What is the advantage of using the graphical method to determine the break-even point?

    <p>It provides a visual representation of the break-even point</p> Signup and view all the answers

    What is the main assumption underlying the break-even analysis?

    <p>The costs and income of the business will always be equal at the break-even point</p> Signup and view all the answers

    What is the primary reason for calculating the break-even point in a business?

    <p>To understand the relationship between costs and income</p> Signup and view all the answers

    What is the key assumption underlying the break-even analysis?

    <p>The selling price per unit is fixed</p> Signup and view all the answers

    What is the main advantage of using the graphical method to determine the break-even point?

    <p>It helps to visualize the relationship between costs and income</p> Signup and view all the answers

    What happens to the break-even quantity if the fixed costs increase?

    <p>It increases</p> Signup and view all the answers

    What is the effect on the break-even quantity if the fixed costs and the variable cost per unit both increase by the same percentage?

    <p>The break-even quantity will remain the same</p> Signup and view all the answers

    What is the relationship between the break-even point and the business's income?

    <p>The break-even point is the point where the business's income equals its costs</p> Signup and view all the answers

    If the selling price per unit is $100 and the variable cost per unit is $60, what will be the effect on the break-even quantity if the fixed costs increase by $1,000?

    <p>The break-even quantity will increase by 5 units</p> Signup and view all the answers

    What is the relationship between the number of units sold and the total cost?

    <p>The total cost is directly proportional to the number of units sold</p> Signup and view all the answers

    What is the main difference between the graphical method and the trial and improvement method of determining the break-even point?

    <p>The graphical method provides a visual representation, while the trial and improvement method uses equations</p> Signup and view all the answers

    What is the effect on the break-even quantity if the selling price per unit increases by 10% and the variable cost per unit decreases by 10%?

    <p>The break-even quantity will decrease</p> Signup and view all the answers

    What is the result of solving the income equation equal to the cost equation in break-even analysis?

    <p>The break-even quantity</p> Signup and view all the answers

    What is the effect on the income if the number of units sold increases by 10%?

    <p>The income will increase by 10%</p> Signup and view all the answers

    What is the significance of the break-even point in a business?

    <p>It is the point where the business's income equals its costs</p> Signup and view all the answers

    What is the relationship between the break-even quantity and the fixed costs?

    <p>The break-even quantity is directly proportional to the fixed costs</p> Signup and view all the answers

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