Chapter 10 Multiple-choice questions

. Which of the following costs would be a fixed cost for Carl; a confectionery manufacturer?

Sugar

Electricity costs to run the manufacturing machines

Hourly paid wages

Supervisor's salary

. Which of the following is a definition for variable costs

Costs that remain the same whatever the level of output

Costs that contain a fixed and variable element

Costs that vary directly with the number of units produced

Costs that will remain fixed as output increases until the activity reaches a level where the costs have to increase sharply

. Luke is arranging for a party to be held in the students' union. The use of the hall will be free but security costs of £300 will have to be met. The cost of the main band will be £2,500 and the supporting band will cost £450. Tickets will be priced at £15 each. On arrival, every ticket holder will be given a bottle of water, worth £1 per bottle. What are the total fixed costs for this event?

£3,250

£2,500

£1

£15

. Luke is arranging for a party to be held in the students' union. The use of the hall will be free but security costs of £300 will have to be met. The cost of the main band will be £2,500 and the supporting band will cost £450. Tickets will be priced at £15 each. On arrival, every ticket holder will be given a bottle of water, worth £1 per bottle. What is the break-even number of tickets for this event?

179 tickets

167 tickets

217 tickets

233 tickets

. Luke is arranging for a party to be held in the students' union. The use of the hall will be free but security costs of £300 will have to be met. The cost of the main band will be £2,500 and the supporting band will cost £450. Tickets will be priced at £15 each. On arrival, every ticket holder will be given a bottle of water, worth £1 per bottle. If Luke sells 400 tickets as he anticipates, what profit will he make?

£3,085

£2,505

£5,600

£2,338

. Which of the following is a definition of break-even point?

The difference between the selling price of a product and the variable costs incurred in producing that product

The fixed plus variable costs of the business

The situation where neither a profit nor a loss is made

The situation where a profit is made

. If the contribution per unit is £25 and the break-even point is 80,000 units. Which of the following statements could NOT be true?

The selling price per unit is £55 and the variable cost per unit is £30

The fixed costs are £2,000,000

To make a profit of £300,000, 92,000 units would have to be sold

To make a profit of £500,000, 95,000 units would have to be sold

. Which of the following is the least secure margin of safety for a business to have?

A margin of safety of 3,000 units and a percentage margin of safety of 20%

A margin of safety of 300 units and a percentage margin of safety of 30%

A margin of safety of 300 units and a percentage margin of safety of 35%

A margin of safety of 3,000 units and a percentage margin of safety of 25%

. Jenny expects to produce and sell 7,000 units at £15 each. Each unit will cost her £9 to produce and fixed costs will be £60,000 per annum. What is the break-even point in units?

6,667 units

4,000 units

10,000 units

1,000 units

. Which of the following is not an underlying assumption of break-even analysis?

Costs can easily be divided into fixed and variable.

Fixed costs remain static over a relevant range.

The unit selling price will remain constant throughout the relevant range.

Raw materials unit costs may diminish with increased output.

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