1.

The Break-even Point of a company is that level of sales income which will
equal the sum of its fixed cost.

a) True
b) False

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ANSWER: a) True

2. Which of the following are characteristics of B.E.P?

a) There is no loss and no profit to the firm.

b) Total revenue is equal to total cost.
c) Contribution is equal to fixed cost.
d) All of the above.

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ANSWER: d) All of the above.

3. Which of the following are assumptions for break-even analysis?

A) Elements of cost cannot be divided in different groups.

B) Fixed cost remains certain from zero production to full capacity.

C) Behavior of different costs is linear

D) Selling per price unit remains constant.

a) A, B, C
b) B, C, D
c) A, C, D
d) A, B, D

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ANSWER: b) B, C, D
4. While measuring break-even analysis, it is considered that during a specific
period there will be no change in general price level, i.e., labor, cost of material
and other overheads.

a) True
b) False

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ANSWER: a) True

5. Which of the following are limitations of break-even analysis?

A) Static concept
b) Capital employed is taken into account.
c) Limitation of non-linear behavior of costs
d) Limitation of presence of perfect competition

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ANSWER: A) Static concept

6. Break-even analysis is used in “Make or Buy” decision.

a) True
b) False

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ANSWER: a) True

7. Using equation method, Break-even point is calculated as

a) Sales = Variable expenses + Fixed expenses + Profit

b) Sales = Variable expenses + Fixed expenses - Profit

c) Sales = Variable expenses - Fixed expenses + Profit

d) None of the above

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ANSWER: a) Sales = Variable expenses + Fixed expenses + Profit

8. Given selling price is Rs 10 per unit, variable cost is Rs 6 per unit and fixed
cost is Rs 5,000. What is break-even point?

a) 500 units
b) 1,000 units
c) 1,250 units
d) None of the above

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ANSWER: c) 1,250 units

9. Contribution is also known as

a) Contribution margin
b) Net Margin
c) Both a and b
d) None of the above

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ANSWER: a) Contribution margin

10. Given selling price is Rs 20 per unit, variable cost is Rs 16 per unit
contribution is

a) Rs 1.25 per unit

b) Rs 4 per unit
c) Rs 0.8 per unit
d) None of the above

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ANSWER: b) Rs 4 per unit

 11. At breakeven point there is
a. Profit
b. Loss
c. No profit or loss
d. None of these
(Ans:c)
 
12. At breakeven point
a. Total expenses = Total revenue
b. Total expenses > Total revenue
c. Total expenses < Total revenue
d. Any of the above
(Ans:a)
 
13. In any organization, profits depends mainly upon
a. Production cost
b. Production output
c. Revenue
d. All of the above
(Ans:d)
 
14. There are various methods to reduce cost of production, except
a. Increase in production output
b. Reduction in number of rejections
c. Maintaining maximum inventory levels
d. Producing standardized products
(Ans:c)
 
15. The following assumptions are made in case of break even analysis, except
a. All fixed costs are fixed
b. All variable costs are fixed
c. The prices of input factors are constant
d. Volume of production and volumes of sales are equal
(Ans:b)

16. The breakeven point is obtained at intersection of

a. Total revenue and Total cost line
b. Total cost and variable cost line
c. Variable cost and fixed cost line
d. Fixed cost and total cost line
(Ans:a)

 
 17. Margin of safety is equal to
a. Actual sales – Sales at Breakeven point
b. Actual sales + Sales at Breakeven point
c. Actual sales x Sales at Breakeven point
d. Actual sales / Sales at Breakeven point
(Ans:a)
 

18. To increase margin of safety, the following measures can be taken

Increase in sales price
Increase the output
Reduce the fixed and variable costs
Which of the following is/are true?
Only i
i & ii
ii & iii
All of the above
(Ans:d)

19. The term marginal cost can be used as a substitute of variable cost while
measuring Contribution.

a) True
b) False

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ANSWER: a) True

20. Determine total as well as per unit contribution if Sales is Rs 40,000, Sales in
units is 4,000 and variable cost is Rs 30,000.

a) Rs 10,000 and Rs 2.5

b) Rs 70,000 and Rs 3.5
c) Rs 36,000 and Rs 3.6
d) None of the above

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ANSWER: a) Rs 10,000 and Rs 2.5

21. Determine Contribution if Sales is Rs 1,50,000 and P/V ratio is 40%.

a) Rs 60,000
b) Rs 70,000
c) Rs 30,000
d) None of the above

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ANSWER: a) Rs 60,000

22. Determine Contribution if Fixed cost is Rs 40,000 and profit is Rs 30,000.

a) Rs 60,000
b) Rs 70,000
c) Rs 30,000
d) None of the above

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ANSWER: b) Rs 70,000

23. Determine Contribution if Fixed cost is Rs 50,000 and loss is Rs 20,000.

a) Rs 60,000
b) Rs 70,000
c) Rs 30,000
d) None of the above

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ANSWER: c) Rs 30,000

24. Contribution and profit both are same concepts.

a) True
b) False

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ANSWER: b) False

25. Which of the following statements are true?

a) Contribution doesn’t include fixed cost whereas profit includes fixed cost.

b) Contribution is not based on the concept of marginal cost.

c) Contribution above breakeven point becomes profit.

d) All of the above

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ANSWER: c) Contribution above breakeven point becomes profit.

26. Profit-Volume ratio is also known as

a) Contribution ratio
b) Contribution/Sales ratio
c) Marginal Income percentage
d) All of the above

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ANSWER: d) All of the above

27. Which of the following statements are true?

a) P/V Ratio can never be used to measure break-even point

b) Higher the P/V ratio less will be the profit and vice versa

c) Concept of P/V ratio is also used to determine profit at a given volume of sales

d) All of the above

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ANSWER: c) Concept of P/V ratio is also used to determine profit at a given volume
of sales

28. The P/V ratio can be improved by

a) Decreasing the selling price per unit

b) Increasing variable cost
c) Changing the sales mix
d) None of the above

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ANSWER: c) Changing the sales mix

29. Determine P/V ratio if Sales is Rs 80,000 and Variable cost is Rs 60,000.

a) 40%
b) 25%
c) 50%
d) None of the above

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ANSWER: b) 25%

30. Determine P/V ratio if Sales is Rs 1,00,000, Fixed cost is Rs 30,000 and Profit
is Rs 20,000.

a) 25%
b) 50%
c) 45%
d) None of the above

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ANSWER: b) 50%
31. Determine P/V ratio if Sales per unit is Rs 10 and Variable cost per unit is Rs 7.

a) 25%
b) 50%
c) 45%
d) 30%

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ANSWER: d) 30%

32. Compute P/V ratio if variable cost ratio is 60%.

a) 40%
b) 50%
c) 45%
d) 30%

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ANSWER: a) 40%

33. Estimate amount of profit if Sales is 10,000 units Fixed cost is Rs 50,000,
Variable cost per unit is Rs 12 and selling price per unit is Rs 20.

a) Rs 12,000
b) Rs 5,000
c) Rs 30,000
d) None of the above

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ANSWER: c) Rs 30,000

34. What will be the impact on B.E.P if fixed cost is increased?

a) Decrease
b) No change
c) Increase
d) None of the above
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ANSWER: c) Increase
35. The profit at the level of existing sales is computed as

a) Sales - (Fixed cost + Variable cost)

b) Sales + (Fixed cost + Variable cost)

c) Sales - Variable cost

d) Sales - Fixed cost

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ANSWER: a) Sales - (Fixed cost + Variable cost)

36. Determine amount of profit if Variable costs is Rs 1,20,000 Fixed costs is Rs

40,000 and sales is Rs 2,00,000.

a) Rs 30,000
b) Rs 50,000
c) Rs 12,000
d) Rs 40,000

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ANSWER: d) Rs 40,000

37. The law of demand states that, other things remaining the same, the lower the
price of a good, the
A) smaller will be the demand for the good.
B) larger will be the demand for the good.
C) smaller will be the quantity of the good demanded.
D) larger will be the quantity of the good demanded.
ANSWER :

38. The law of demand implies that demand curves

A) slope down.
B) slope up.
C) shift up whenever the price rises.
D) shift down whenever the price rises.
ANSWER :
39. Which of the following is consistent with the law of demand?

A) An increase in the price of tapes causes an increase in the quantity of tapes

demanded.

B) An increase in the price of soda causes a decrease in the quantity of soda

demanded.

C) A decrease in the price of milk causes a decrease in the quantity of milk demanded.

D) A decrease in the price of juice causes no change in the quantity of juice demanded.

40) When demand decreases (shifts to the left) and supply doesn't change, which
of the following equilibrium changes occur?

A) price falls and quantity decreases.

B) price falls and quantity increases.

C) price rises and quantity decreases

D) price rises and quantity increases.

41) Each point on the demand curve reflects

A) all the wants of a given household.

B) the highest price consumers are willing to pay for an additional unit of a good.

C) the highest price sellers will accept for all units over time.

D) the lowest-cost technology available to produce a good.

42) A change in the price of a good

A) shifts the demand curve and causes a movement along it.

B) shifts the demand curve but does not cause a movement along it.

C) does not shift the demand curve but does cause a movement along it.
D) neither shifts the demand curve nor causes a movement along it.

43) A change in which of the following alters buying plans for cars but does NOT
shift the demand curve for cars?

A) A 5 percent increase in household income.

B) A 10 percent decrease in the price of car insurance.

C) A 20 percent increase in the price of cars.

D) An increased preference for walking

44. Margin of safety is that sales which is above Break-even point.

a) True
b) False

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ANSWER: b) False

45. Margin of safety can be increased by

a) Decrease in setting price

b) Decline in volume of production
c) Reduction in fixed or the variable costs or both
d) None of the above

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ANSWER: c) Reduction in fixed or the variable costs or both

46. Determine Margin of safety if Profit is Rs 15,000 and P/V ratio is 40%.

a) Rs 37,500
b) Rs 33,000
c) Rs 38,000
d) None of the above

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ANSWER: a) Rs 37,500

47. Calculate margin of safety if sales is Rs 3,00,000 and B.E.P is Rs 4,50,000.

a) Rs1,00,000
b) Rs 1,50,000
c) Amount of sales < B.E.P, therefore no margin of safety
d) None of the above
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ANSWER: a) Rs1,00,000

48. A relative price is

A) the ratio of one price to another.

B) the difference between one price and another.

C) the slope of the supply curve.

D) the slope of the demand curve.

49. The law of demand implies that if nothing else changes, there is

A) a linear relationship between price of a good and the quantity demanded.

B) a positive relationship between the price of a good and the quantity demanded.

C) a negative relationship between the price of a good and the quantity demanded.

D) an exponential relationship between price of a good and the quantity demanded.

50. Which of the following influences people's buying plans and varies moving
along a demand curve?

A) preferences

B) the price of the good

C) income

D) the prices of related goods.