When Calculating the Break-Even Point in a Multi-Product Environment, Which

question 3

Multiple Choice

When calculating the break-even point in a multi-product environment, which of the following statements is false?

• A) The contribution margin per unit for each product needs to be determined.
• B) Total fixed costs need to be determined.
• C) Each product is assumed to count for an equal percentage of total sales.
• D) The weighted-average contribution margin per unit needs to be determined.

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Definitions:

Discounted Cash Flow

An appraisal technique that calculates the worth of an investment by forecasting its future cash inflows and adjusting for the time value of money.

Non-Discounted Cash Flow

Cash flows that are not adjusted for the time value of money, representing raw incoming or outgoing cash streams.

Mutually Exclusive

Situations or events that cannot occur at the same time, implying a choice between alternatives.

IRR Rule

A decision-making tool used in finance to evaluate investments, stating that a project is acceptable if its internal rate of return exceeds the required rate of return.