23 Questions
What is the breakeven point in a cost-revenue model?
The value of a parameter that makes two elements equal
What is the breakeven value in a cost-revenue model?
QBE
What is the purpose of breakeven analysis in a cost-revenue model?
To determine the value of a parameter that makes two elements equal
What type of costs are not directly dependent on the variable in a cost-revenue model?
Fixed costs
What are the two types of costs in a cost-revenue model?
Fixed costs and variable costs
How can the breakeven point be determined in a cost-revenue model?
By using linear or non-linear math relations, trial and error, or spreadsheet functions
What is the formula for profit?
P = R - (FC + vQ)
When variable cost, v, is lowered, what happens to the breakeven point?
It decreases and moves to the left
What is the purpose of finding the breakeven point between two alternatives?
To select the best alternative based on the anticipated value of the common variable
What is the formula for breakeven point (QBE)?
QBE = FC / (r - v)
What is the relationship between revenue per unit and the breakeven point?
An increase in revenue per unit decreases the breakeven point
What is the formula for total cost (TC)?
TC = FC + vQ
What is the breakeven amount a point of indifference to?
Accept or reject a project
When comparing two alternative projects, what should you select if the level is greater than the breakeven?
The alternative with the lower variable cost
What is the main drawback of using payback period to evaluate a project?
It ignores the cash flows after the payback period
What is the purpose of using payback period as a supplemental analysis?
To sense the economic risk in a project
What is the assumption about the interest rate when using payback period?
The interest rate can be 0% or greater than 0%
What is the common variable in the make/buy breakeven analysis?
Number of units produced each year
What is the breakeven value of X in the example?
4116 units per year
What is the purpose of using the Goal Seek tool in breakeven analysis?
To find the breakeven first cost
What is the result of using AW analysis to select between two machines?
Select machine A with AWA = $193
What is the MARR used in the breakeven analysis example?
10%
What is the breakeven first cost found using the Goal Seek tool?
$96,669
Test your understanding of breakeven point and payback period analysis, including calculating breakeven points for single parameters and multiple alternatives. Learn how to make informed decisions in finance and management with this quiz.
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