Break-even Analysis - Part 1 - MCQs with answers

Break-even Analysis - Part 1 - MCQs with answers


1. The Break-even Point of a company is that level of sales income which will equal the sum of its fixed cost.

a) True
b) False

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ANSWER: a) True



2. Which of the following are characteristics of B.E.P?

a) There is no loss and no profit to the firm.
b) Total revenue is equal to total cost.
c) Contribution is equal to fixed cost.
d) All of the above.

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ANSWER: d) All of the above.



3. Which of the following are assumptions for break-even analysis?

A) Elements of cost cannot be divided in different groups.

B) Fixed cost remains certain from zero production to full capacity.

C) Behavior of different costs is linear

D) Selling per price unit remains constant.

a) A, B, C
b) B, C, D
c) A, C, D
d) A, B, D

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ANSWER: b) B, C, D



4. While measuring break-even analysis, it is considered that during a specific period there will be no change in general price level, i.e., labor, cost of material and other overheads.

a) True
b) False

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ANSWER: a) True



5. Which of the following are limitations of break-even analysis?

A) Static concept
b) Capital employed is taken into account.
c) Limitation of non-linear behavior of costs
d) Limitation of presence of perfect competition

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ANSWER: A) Static concept



6. Break-even analysis is used in “Make or Buy” decision.

a) True
b) False

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ANSWER: a) True



7. Using equation method, Break-even point is calculated as

a) Sales = Variable expenses + Fixed expenses + Profit

b) Sales = Variable expenses + Fixed expenses - Profit

c) Sales = Variable expenses - Fixed expenses + Profit

d) None of the above

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ANSWER: a) Sales = Variable expenses + Fixed expenses + Profit



8. Given selling price is Rs 10 per unit, variable cost is Rs 6 per unit and fixed cost is Rs 5,000. What is break-even point?

a) 500 units
b) 1,000 units
c) 1,250 units
d) None of the above

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ANSWER: c) 1,250 units



9. Contribution is also known as

a) Contribution margin
b) Net Margin
c) Both a and b
d) None of the above

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ANSWER: a) Contribution margin



10. Given selling price is Rs 20 per unit, variable cost is Rs 16 per unit contribution is

a) Rs 1.25 per unit
b) Rs 4 per unit
c) Rs 0.8 per unit
d) None of the above

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ANSWER: b) Rs 4 per unit


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