Select the best alternative for the following question. 1. The break-even po int

Question

Select the best alternative for the following question. 1. The break-even po int is the level of production at which a. b. c. d. the cost varies according to the volume of activity total revenue and cost are balanced the cost of system capacity is equal to total cost profits exceed costs 2. All of the following are disadvantages of a conservative capacity strategy EXCEPT a. customer service is likely to suffer throughout the firm's timeline b. competitors may maximize opportunities to enter the market and establish themselves by claiming unmet demand c. system overload may result in higher average costs than necessary 3. In an airport, the line at customs typically winds back and forth between roped dividers, and then splits to multiple service channels to the next available customs official. This type of queue is called a. serpentine line b. single-channel system c. hybrid system d. take-a-number system

Explanation / Answer

1.Answer: option b; total revenue and cost are balanced

Explanation:

Breakeven point is the volume at which total cost and total revenue are equal. When the volume is less than break-even point there is loss and when the volume is greater than break-even point, there is profit.

2. Answer: option d; competitors have less incentive and opportunity to enter this marketplace.

Explanation:

A lag strategy is a conservative capacity planning strategy and it runs on full capacity and increases the capacity only when there is an actual increase in demand. The strategy may result into system overload and higher average cost than necessary. Customer service also suffers throughout the firm’s timeline due to shortage of capacity. The competitors may take advantage by maximizing opportunities to enter the market and establish themselves by claiming the unmet demand. But the strategy provides more incentives and opportunity for the competitors to enter the marketplace.

3. Answer: option a; serpentine line

Explanation:

A serpentine line moves zigzag like a snake which winds back and forth and then split into multiple service channels. The airport check in areas mostly uses this type of queue.

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