Echo Ltd Sells Its Single Product for $14 Per Unit

question 8

Multiple Choice

Echo Ltd sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows: Point A is best described as:

• A) fixed cost.
• B) margin of safety.
• C) estimated profit at actual volume.
• D) breakeven point.

---

Definitions:

Average Rate of Return

A financial ratio that represents the expected annual earnings of an investment as a percentage of its initial cost.

Average Investment

The sum of the initial investment and the value at the end of the investment period divided by two, often used in calculating returns.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life evenly.

Useful Life

The estimated period a fixed asset is expected to be useful to the purchasing company, affecting its depreciation calculations.