Problem 1. If nothing else changes, an increase in fixed cost will
A. decrease the break-even quantity point
B. increase the break-even quantity point
C. will have no effect on the break-even point
D. may either increase or decrease the break-even point
Problem 2. The degree of operating leverage can be defined as
A. the change in profit for a $1 change in quantity
B. the change in quantity for a $1 change in profit
C. the percentage change in quantity for a given percentage change in profit
D. the percentage change in profit for a given percentage change in quantity
Problem 3. If a company wants to break-even at 20,000 units, its variable cost per unit is $3, and its fixed cost per period is $40,000, its selling price per unit will have to be:
A. $5
B. $5.50
C. $6
D. $6.50
Problem 4. For a given percentage change in sales, the higher the degree of operating leverage,
A. the higher will be the percentage change in profit
B. the lower will be the percentage change in profit
C. the higher will be the absolute change in profit
D. the lower will be the absolute change in profit
Problem 5. The term capital budgeting refers to decisions
A. which are made in the short run
B. which concern the spreading of expenditures over a period lasting less than one year.
C. where expenditures and receipts for a particular undertaking will continue over a relatively long period of time
D. where a receipt of cash will occur simultaneously with an outflow of cash.