If Fixed Costs Are $500,000 and Variable Costs Are 60

question 181

True/False

If fixed costs are $500,000 and variable costs are 60% of break-even sales, profit is zero when sales revenue is $930,000.

Evaluate the effectiveness of sales incentive programs.

Recognize the importance of balancing short-term incentives with long-term organizational goals.

Understand the concept and criticisms of merit pay plans.

Recognize the dependency of merit pay plans on effective performance appraisal systems.

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Definitions:

Variable Manufacturing Overhead

Costs of manufacturing that vary directly with the level of production, such as utilities for the manufacturing plant.

Break-even Sales

The amount of revenue needed to cover all fixed and variable costs, resulting in neither profit nor loss.

Southern Division

A geographical or organizational subsection of a company that operates in the southern region.

Fixed Expenses

Costs that remain constant in total regardless of changes in the level of activity or volume of output.