Break-even in-class practice

Which of the following is the correct formula for calculating contribution per unit?

• Price per unit + variable cost per unit

• Total revenue – total cost

• Price per unit – variable cost per unit

• Total revenue – total variable cost

The point at which the level of sales of a business exactly equals its costs is known as the...

• Start-up stage

• Break-even point

• Insolvency point

• Profit point

Mr Icy is a popular shop in a busy town, selling tubs of frozen yoghurt. Each tub has a variable cost of $0.25 and sells for $1.50. Mr Icy’s fixed costs of operating the shop are $10,000 per month. What is the contribution per tub of frozen yoghurt?

• $1.75

• $0.75

• $1.25

• $1.00

Mr Icy is a popular shop in a busy city, selling tubs of frozen yoghurt. Each tub has a variable cost of $0.25 and sells for $1.50. Mr Icy’s fixed costs of operating the shop are $10,000 per month. How many tubs of frozen yoghurt must Mr Icy sell each month in order to break-even?

• 12,333

• 4,333

• 6,000

• 8,000

Mr Icy is a popular shop in a small town, selling tubs of frozen yoghurt. Mr Icy needs to sell 8,000 tubs of frozen yoghurt each month to break-even. Last month Mr Icy sold 9,500 tubs. Using this information, calculate Mr Icy’s margin of safety.

• 8,000

• -1,500

• 1,500

• 9,000

The difference between actual sales and the number of units needed to break- even is known as the...

• Margin of safety

• Standard cost

• Margin of error

• Opportunity cost

On a break-even chart, what does the horizontal axis measure?

• Opportunity cost

• Output or units of production

• Cost and revenues

• Profit or loss

Boards R Us is a surfboard shop in a famous beachside town. Each surfboard has a variable cost of $420 and sells for $500. The fixed costs for Boards R Us are $12,000 per month. Using this information, how many surfboards must Boards R Us sell each month in order to break-even?

• 80

• 200

• 149

• 150

Boards R Us is a surfboard shop in a famous beachside town. The fixed costs for Boards R Us are $12,000 per month, and the contribution per surfboard is $80. Using this information, if the target profit is $20,000 how many surfboards must Boards R Us sell each month?

• 440

• 220

• 180

• 400

Which of the following is a limitation of break-even analysis?

• It provides a visual means of analysing a firm’s financial position at various levels of output

• It can be used to gauge the level of risk in a particular project

• It can be used as a strategic decision-making tool

•  It does not allow for possible changes in costs over time