Use the Breakeven Model to Determine Which of the Statements

question 17

Multiple Choice

Use the breakeven model to determine which of the statements below is TRUE according to the information provided in the table relating to two different locations considered for a new manufacturing facility.
$\begin{array}{c}\begin{array}{c}\text { LOCATION}\\\hline \text { Site A}\\\text { Site B}\\\end{array}\begin{array}{c}\text { ANNUAL FIXED COSTS}\\\hline\$ 50,000 \\\$ 20,000\end{array}\begin{array}{c}\text { UNIT VARIABLE COSTS}\\\hline\$ 10 \\\$ 30\end{array}\end{array}$

• A) Site A is the desired location if the production rate is 1000 units per year
• B) The breakeven point for these two locations is 1500 units per year
• C) Site B is the desired location if the production rate is 2000 units per year
• D) The breakeven point for these two locations is 500 units per year

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Definitions:

Standard Activity

A benchmark or norm for measuring performance or efficiency, often used in costing and budgeting processes.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to individual products or job orders, calculated before the production period based on estimated costs and activity levels.

Labor Rate Variance

It's the difference between the actual cost of labor and the budgeted or standard cost of labor.

Standard Hourly Rate

A fixed rate paid or charged for one hour of labor or service.