Fundamentals of Financial Management, Third Edition

OBJECTIVE-TYPE QUESTIONS

1. Mark true or false.
   1. BEP denotes a point where revenue exceeds cost.
   2. BEP is meaningless if there is no fixed cost involved in production.
   3. Break-even analysis does not explain any relationship between cost, output and profit.
   4. The amount of sales at BEP is reflected through the ratio of fixed cost and margin of contribution.
   5. BEP can be changed through changes in the sale price.
   6. BEP cannot be changed through changes in the fixed and variable costs.
   7. Margin of safety is the difference between actual sales and BEP sales.
   8. In case of sales mix, weighted average of contribution margin is relied upon for arriving at BEP.
2. Choose the most suitable answer.
   1. The results of break-even analysis cannot be relied upon, because:
      1. increase ...