Break-Even Analysis

question 73

Multiple Choice

Break-even analysis. Binders-For-School, Inc., 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 firm will charge $60 for each textbook and has determined that the high-capacity machine will maximize pretax operating cash flow 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:

Printed Check

A preprinted form used to make payment from a bank account, containing the details of the payee and the amount.

Upper-Right Corner

A term often used to describe the location at the top right portion of a page, screen, or area.

Reconciling

The process of ensuring that two sets of records (usually the balances of two accounts) are in agreement.

Bank Statement

A record of an account sent to the account holder, usually on a monthly basis, showing the beginning balance, all deposits made, all checks drawn, all bank service charges and interest earned, and the closing balance.