Straight‑line Break‑even Analysis Implies That​

question 17

Multiple Choice

Straight‑line break‑even analysis implies that​
1) fixed costs eventually decline
2) per unit variable cost may initially fall but start to increase with further increases in output
3) per unit variable costs are constant

• A)​1 and 2
• B)1 and 3​
• C)2 and 3​
• D)​only 3

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Definitions:

Differential Cost

The difference in total cost that will result from selecting one alternative over another.

Contribution Margin

The difference between sales revenue and variable costs, indicating the amount available to cover fixed costs and generate profit.

Variable Administrative Expenses

Expenses within the administration sector that fluctuate with the level of business activity, like sales commissions.

Contribution Margin

The amount by which a product's sales price exceeds its variable costs, used to cover fixed costs and generate profit.