Which of the Following Statements About Break-Even Analysis Is Incorrect

question 8

Multiple Choice

Which of the following statements about break-even analysis is incorrect?

• A) No start-up costs exist.
• B) Economies of scale cannot be achieved.
• C) Variable costs vary as output changes.
• D) Fixed costs vary as output changes.

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Definitions:

Production

The process of creating goods and services through the combination of labor, materials, and technology.

Direct Materials Cost

The cost of raw materials that can be directly traced to the production of goods, considered a variable cost in manufacturing.

Inventories

Assets held for sale, or in the process of being produced for sale, or to be used in the production process.

Overapplied Manufacturing Overhead

This occurs when the allocated manufacturing overhead cost is more than the actual manufacturing overhead costs incurred.