6.3 Financial terms and calculations(1)

Which of the following best describes a fixed cost? A cost that:

• Changes directly with output

• Can change with time and is constant, regardless of output

• Only needs to be paid once, when the business first starts-up

• Needs to be paid once a month

Which of the following is an example of a variable cost?

• Salaries of management

• Insurance

• Rent

• Stock

A business’ break-even output is measured in terms of:

• Profit

• Number of employees

• £s

• Units

Which of the following variables is often not shown on a break-even chart?

• Total revenue

• Total costs

• Total variable costs

• Output

A business negotiates a bulk buying discount with its suppliers. The immediate effect on the business of this action will be:

• Sales revenue will fall and profits will increase

• Sales revenue will remain the same and profits will increase

• Sales revenue and profits will fall

• Sales revenue will remain the same and profits will fall

Which of the following is a drawback, to the owner of a new business start-up, of using break-even analysis?

• It will help to gain funding from the bank as part of a business plan

• B It assumes that all the output the business produces will be sold

• It will help to determine whether the business idea is viable

• It will help to determine the level of output needed to make a profit

At zero output on a break even chart, the total cost line will always start:

• At zero on both axes

• Where the variable cost line starts

• Where the fixed cost line starts

• Where the total revenue line starts

Based on this information, Business A’s fixed costs are:

• £10,000

• £30,000

• £40,000

• £70,000

The line with a value of £50,000 at an output of 3,000 units is called:

• Total revenue

• Total costs

• Fixed costs

• Total variable costs

Business Y’s break-even point is::

• 700 units

• 1,000 units

• 2,000 units

• 3,000 units