If the Price Per Unit Decreases Because of Competition but the Cost

question 88

Multiple Choice

If the price per unit decreases because of competition but the cost structure remains the same:

• A) the break-even point increases.
• B) the break-even point decreases.
• C) the degree of financial leverage declines.
• D) the degree of combined leverage declines.

Calculate the price per share in acquisition deals using financial information.

Recognize the implications of mergers and acquisitions on company structure (e.g., consolidation, becoming a subsidiary).

Understand the principles of friendly versus hostile takeovers.

Comprehend the economic and shareholder impacts of mergers and acquisitions.

---

Definitions:

Opportunity Costs

The benefit lost when one alternative is chosen over another, representing the cost of forgoing the next best alternative.

Accounts

This term involves the records that summarize transactions affecting the financial position and operating results of a business.

Supervisory Costs

Indirect costs related to the salaries and benefits of supervisory staff within the production process.

Machine Hours

A measure of production activity or volume based on the number of hours machines are operating in the manufacturing process.