Question

Multiple Choice based on accounting profits is preferable to the financial (or present value) break-even method. identifies the optimal maximum level of output for any given level of fixed assets. ignores both taxes and interest when computing the financial break-even point. provides a means of determining the minimal number of units that need to be sold to prevent a financial loss. identifies the optimal sales price for any new product.

Answer 1

Complete Question:

Breakeven-Analysis:

Group of answer choices

A. based on accounting profits is preferable to the financial (or present value) break-even method.

B. identifies the optimal maximum level of output for any given level of fixed assets.

C. ignores both taxes and interest when computing the financial break-even point.

D. provides a means of determining the minimal number of units that need to be sold to prevent a financial loss.

E. identifies the optimal sales price for any new product.

Answer:

D. provides a means of determining the minimal number of units that need to be sold to prevent a financial loss.

Explanation:

Breakeven-Analysis provides a means of determining the minimal number of units that need to be sold to prevent a financial loss.

It is an important tool in predicting the volume of activity, the costs to be incurred, the sales to be made, and the profit to be earned is. It is used to determine how changes in differing levels of activities such as costs and volume affect a company's operating income and net income. It is also known as the cost-volume-profit analysis in financial accounting.

Generally, to use the Breakeven-Analysis, financial experts usually make some assumptions and these are;

1. Sales price per unit product is kept constant.

2. Variable costs per unit product are kept constant and the total fixed costs of production are kept constant i.e costs can be divided into fixed and variable components.

3. All the units produced are sold i.e there is no change in inventory quantities during the period.

5. The costs accrued are as a result of change in business activities.

6. A company selling more than a product should simply sell in the same mix i.e the sales mix is constant.