Break-Even Analysis

question 29

Multiple Choice

Break-even analysis. Binders-For-School Ltd is in the process of determining whether to purchase a high-capacity machine to make textbooks for the upcoming school year. The high-capacity machine will generate fixed costs of $10,000 per year versus the $2,000 fixed costs of using a low-capacity machine. The variable costs per unit when using the high-capacity machine will be $30. The company will charge $60 for each textbook and has determined that the high-capacity machine will be more economically beneficial if sales are greater than 800 books. What is the contribution margin under the low-capacity machine scenario?

• A) $10
• B) $20
• C) $30
• D) $40

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Definitions:

Correlate

To have a mutual relationship or connection, where one thing affects or depends on another.

Large

Of considerable or relatively great size, extent, capacity, or quantity.

Randomly Chosen Groups

Groups formed without any predetermined pattern, often used in experimental designs to ensure objectivity.

Confounding Variable

An external factor in a study that could influence or mix up the results, making it hard to draw clear conclusions.