A Firm Has Fixed Costs of $1

question 76

Multiple Choice

A firm has fixed costs of $1.2 million and depreciation of $1 million. At a sales level of $3.6 million, the variable costs of $2.304 million. What is the accounting break-even level of sales?

• A) $5.23 million
• B) $3.44 million
• C) $6.11 million
• D)$4.87 million

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Definitions:

Marginal Costs

The financial outlay required to produce an additional unit of a product or service.

Cash Flows

The total amount of money being transferred into and out of a business, especially affecting liquidity.

Interest Rate

The percentage of a sum of money charged for its use, often expressed annually, affecting loans and savings.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return.