How can you calculate profit?

Total Contribution - Fixed Costs

How much of the price per unit goes to paying fixed costs

All of these are limitations of break-even analyses except...

It cannot be used as a tool for decision-making

Which of these is true about fixed costs

They need to be paid regardless of output

What does it mean to break even?

This is where your total revenue equals you total costs

level of output needed to earn a specified amount of profit

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IB BM 3.2 and 3.3

18 termsStudBud Administration34 plays

A quick revision of these two subchapters.

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Questions 18

Answers

1
How can you calculate profit?
Total Costs + Total Revenue
Variable Costs - Fixed Costs
Total Revenue - Variable Costs
Total Contribution - Fixed Costs
2
Contribution is
Money you invest in your own business
The amount of money you get to keep
How much of the price per unit goes to paying fixed costs
How much of the variable cost becomes fixed
3
Rent and property taxes are likely to be fixed costs for most organisations
True
False
4
Costs that do not vary with output in the short run
Fixed costs
Semi-variable costs
Marginal costs
Variable costs
5
If total costs increase
All of the above
Profit will be lower
More output is needed to at least cover the total costs
Break even point will be higher
6
All of these are limitations of break-even analyses except...
Fixed costs may change based on levels of activity
It doesn't account for discounts
It assumes cost lines are linear
It cannot be used as a tool for decision-making
7
Margin of safety is the current output - the break-even output.
True
False
8
The average cost per unit of production will usually decrease as the level of output increases
False
True
9
Which is not an example of a variable cost of production for a car manufacturer?
Car components from other suppliers
Raw materials
Piece-rate remuneration
Insurance costs
10
A baker sells 200 cookies at $10 per cookie. His VC per cookie is $6, FC are $800. He...
breaks even
is losing $200
can afford to make less cookies
makes $100 in profit
11
A direct cost of running a school is the cost of cleaning it
False
True
12
Which is not a business expense?
Stationary
Electricity
Sales
Internet data
13
What's going on here?
Margin of safety has increased
All of the above
The price must've gone up
Break-even point is now lower
14
Which of the costs below is a fixed cost for a restaurant?
Food supplies
Rent
Utility bills (e.g. gas and electricity)
Staff wages
15
Which of these is true about fixed costs
They cannot be shown in the graph
They need to be paid regardless of output
The line begins from zero
They never change
16
Costs that have both a fixed cost and a variable cost element
Fixed costs
Semi-variable costs
Variable costs
Marginal costs
17
What does it mean to break even?
This is where your total revenue equals you total costs
This is where your revenue per unit covers your fixed costs
This is when you have no profit
This is then all of your variable costs are covered
18
Target profit output
minimum level of output to make a profit
none of the above
level of output to make break-even profit
level of output needed to earn a specified amount of profit

IB BM 3.2 and 3.3 Flashcards | StudBud