Tipping Point

1. When a business has made enough money to pay its costs and begin to make a profit, it has reached its

• a. break-even point.

• b. variable-cost margin.

• c. fixed cost.

• d. selling price.

2. Some business costs are classified as fixed costs because they

• a. must be paid within a set time.

• b. don’t change when sales go up or down.

• c. are unpredictable and must be estimated.

• d. cost all businesses the same amount.

3. If a business’s sales double, its variable costs will most likely

• a. remain the same.

• b. decrease.

• c. increase.

• d. double.

4. It may be difficult for a new business to predict its variable costs because new businesses

• a. are sometimes short of working capital.

• b. don’t have access to industry figures.

• c. may have inexperienced employees.

• d. don’t have past sales records.

5. Most businesses receive the bulk of their income from

• a. dividends.

• b. sales revenue.

• c. return on investment.

• d. capital.

6. Businesses can increase their income from sales by

• a. increasing their selling prices

• b. controlling their costs

• c. reducing the number of sales.

• d. paying smaller dividends.

7. A business that does not reach break-even will

• a. go bankrupt.

• b. have profit and loss.

• c. lose money.

• d. need to relocate.

8. One of the purposes of calculating break-even is to help the business to

• a. determine stock value.

• b. prepare an income statement.

• c. forecast sales.

• d. set selling prices.

9. How can calculating break-even help a business decide whether it should move to a more

expensive location?

• a. It shows how much sales revenues will increase.

• b. It shows how much added income will be needed.

• c. It summarizes current income and expenses.

• d. It categorizes fixed and variable costs.

10. How does calculating break-even affect a business’s decision to provide incentives for

employees?

• a. It provides a comparison of different types of incentives.

• b. It estimates the profit employees will earn from each incentive.

• c. It shows the business when it can afford to offer incentives.

• d. It shows whether employees qualify to receive incentives.