Which One of the Following Statements About Break-Even Analysis, as We

question 79

Multiple Choice

Which one of the following statements about break-even analysis, as we applied it to evaluating products or services, is best?

• A) Break-even analysis assumes that the cost function is linear and consists of fixed costs plus variable costs times volume.
• B) The break-even quantity will increase when the change in variable cost per unit is identical to the change in unit price.
• C) Increasing the price, while keeping the variable cost per unit constant, increases the break-even quantity.
• D) Increasing the fixed costs tends to decrease the break-even quantity.

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Definitions:

Product Warranty Payable

A liability account that represents the amount a company expects to pay to repair or replace products under warranty.

Matching Concept

A fundamental accounting principle that requires expenses to be recorded in the same period as the revenues they help generate.

Product Warranty Expense

The cost associated with repairing or replacing products under warranty, recognized by companies to cover future warranty claims.

Warranty Repairs

Services offered for free by a manufacturer or seller to correct defects or malfunctions within a certain period after purchase.