Assume an Asset Costs $100

question 91

Multiple Choice

Assume an asset costs $100.The asset ends up losing $2.If you purchased the asset entirely with your own money the rate of return would be ________.If you purchased the asset with $10 of your own money and $90 of borrowed money, the rate or return would be ________.

• A)-2%; -20%
• B)-20%; -2%
• C)-2%; -2.22%
• D)2%; 20%
• E)20%; 2%

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Definitions:

Break-even Point

The point at which total costs and total revenue are equal, resulting in no net gain or loss for a business.

Contribution Margin

Contribution margin is the amount of revenue remaining after deducting the variable costs of producing a product, indicating how much contributes to covering fixed costs and generating profit.

Variable Costs

Costs that fluctuate based on the level of a business’s activity.

Total Direct Labor Cost

The total expenses incurred from labor directly involved in the production of goods or services.