For a Firm That Would Break Even at $200 000

question 87

Multiple Choice

For a firm that would break even at $200 000 sales and earn a profit of $30 000 at sales of $250 000, which of the following statements is always true?

• A) Fixed costs are $80 000.
• B) The selling price is $2 per unit.
• C) Profit at sales of $300 000 would be $80 000.
• D) The contribution margin is 60 per cent of sales.

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Definitions:

Market Risk Premium

The difference between the expected return on a market portfolio and the risk-free rate.

Portfolio Beta

A measure of a portfolio's sensitivity to market movements, indicating its volatility relative to the market.

Risk-Free Rate

The theoretical rate of return of an investment with zero risk, typically represented by the yield on government securities like U.S. Treasury bonds.

Sample Standard Deviation

A measure of the dispersion or variability in a subset of data from its mean, used to estimate the standard deviation of the entire population.