Break Even Analysis Quiz

What is the primary purpose of break even analysis?

• To calculate total expenses

• To determine the maximum profit

• To assess market competition

• To find the point where revenues equal costs

Which of the following is a fixed cost?

• Raw materials

• Salaries

• Electricity

• Packaging

How does break even analysis assist in pricing strategy?

• By setting the lowest possible price

• By increasing the selling price

• By reducing production costs

• By determining a competitive yet profitable price

What does the break even chart visually represent?

• Only the total revenue

• Only the total costs

• Costs, revenues, and the break even point

• Market demand and supply

What does a steep angle of incidence on a break even chart indicate?

• Higher profitability per unit

• Lower profitability per unit

• Lower sales volume required

• Higher sales volume required

How is the margin of safety calculated?

• Fixed costs divided by variable costs

• Total revenue minus total costs

• Break even sales minus actual sales divided by break even sales

• Actual sales minus break even sales divided by actual sales

In which industry is break even analysis particularly useful for pricing new product lines?

• Healthcare

• Technology

• Agriculture

• Retail

Which of the following is a benefit of break even analysis?

• Increases market competition

• Provides clarity in pricing

• Eliminates all business risks

• Reduces production time

What is a limitation of break even analysis?

• It focuses on intangible products

• It considers market dynamics

• It assumes costs and prices remain constant

• It accounts for time to reach break even

Which practical tip is recommended for using break even analysis effectively?

• Reassess costs and revenues periodically

• Avoid scenario planning

• Focus only on fixed costs

• Ignore market research