Breakeven Analysis 6. Fixed Expenses do not change in total when there is a mode

Question

Breakeven Analysis

6. Fixed Expenses do not change in total when there is a modest change in sales. TRUE FALSE

7. An example of a fixed expense would be a 5% sales commission. TRUE FALSE

8. Property taxes and rent are often fixed expenses. TRUE FALSE

9. Variable expenses change in total as volume changes. TRUE FALSE

10. If a company requires a profit of $30,000 (instead of breaking even), the $30,000 should be combined with the fixed expenses in order to compute the point at which the company will earn $30,000. TRUE FALSE

11. The contribution margin per unit is the selling price per unit minus the fixed expenses per unit. TRUE FALSE

Explanation / Answer

6. Fixed Expenses do not changer in total when there is a modest change in sales. True

7. An example of a fixed expense would be a 5% sales commission. False

Note:- 5% sales commission is an example of variable expense.

8. Property taxes and rent are often fixed expenses. True

9. Variable expenses change in total as volume changes. True

10. If a company requires a profit of $30,000 (instead of breaking even), the $30,000 should be combined with the fixed expenses in order to compute the point at which the company will earn $30,000. True

Note:- Sales (in units) = (Fixed expenses + Required Profit) ÷ Contribution margin per unit

Sales (in dollars) = (Fixed expenses + Required Profit) ÷ Contribution margin ratio

11. The contribution margin per unit is the selling price per unit minus the fixed expenses per unit. False

Note:- The contribution margin per unit is the selling price per unit minus the variable expenses per unit.

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