1. A highly automated plant would generally have all fixed costs more fixed than
ID: 2715956 • Letter: 1
Question
1. A highly automated plant would generally have
all fixed costs
more fixed than variable costs
all variable costs
more variable than fixed costs
2. If the price per unit decreases because of competition but the cost structure remains the same
the breakeven point rises
the degree of combined leverage declines
the degree of financial leverage declines
all of these.
$8.50
$7.50
$6.00
$9.50
4. Davison Toaster Corp. sells its products for $250 per unit. It has the following costs:
$6 per unit
The break-even point is
1,210 units
not enough information has been provided to determine the break-even point.
less than 1,710 units
more than 1,210 units
5. A low DOL means:
there is low debt.
there are high overhead costs.
there is a large amount of equity.
there are low fixed costs.
6. Breakeven analysis
is useful to know how much changes in volume affect cost and profit.
short-term profitability.
does not include depreciation expense as a fixed cost when calculating the degree of financial leverage.
all of these.
7. Combined leverage is concerned with the relationship between
changes in EBIT and changes in net income.
changes in volume and changes in EBIT.
changes in volume and changes in EPS.
changes in EBIT and changes in EPS.
3 If a firm has fixed costs of $31,000, a price of $9.50, and a breakeven point of 15,500 units, the variable cost per unit is:Explanation / Answer
A highly automated plant would generally have
Answer: more fixed than variable costs
If the price per unit decreases because of competition but the cost structure remains the same
Answer: the breakeven point rises
If a firm has fixed costs of $31,000, a price of $9.50, and a breakeven point of 15,500 units, the variable cost per unit is:
Answer: BEP=Fixed cost/(Sales-variable cost)
15500=$31000/($9.50-x)
$9.50-x=$2
X=7.50
Davison Toaster Corp. sells its products for $250 per unit. It has the following costs:
Answer: (109900+290000)/(250-29-6)
=1860 units
more than 1,210 units
A low DOL means:
Answer: there are low fixed costs.
Breakeven analysis
Answer: is useful to know how much changes in volume affect cost and profit.
Combined leverage is concerned with the relationship between
Answer: changes in volume and changes in EPS.
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