Breakeven Analysis Can Be Used to Determine How Large Sales

question 63

True/False

Breakeven analysis can be used to determine how large sales of a new product must be for the firm to achieve profitability,but it is not useful in studying the effects of a general expansion in the firm's operations.

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Definitions:

Raw Materials Quantity Variance

The difference between the expected amount of raw materials required for production and the actual amount used, evaluated in terms of cost.

Labor Rate Variance

The difference between the actual cost of direct labor and the expected (or standard) cost, based on the standard hours worked and standard labor rate.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected variable overhead based on standard cost.

Materials Price Variance

The difference between the actual cost of raw materials and the standard or expected cost, multiplied by the quantity of materials purchased.