Quantitative Method in Practice Break-even Point Part 2

Question 1

are costs such as rent, salaries, advertising, and other overhead costs that remain the same no matter how much of the product is manufactured or sold

Answer 1

Fixed Cost ( FC )

Question 2

are costs that vary or change directly with the amount of product produced and sold.

Answer 2

Variable Cost ( VC )

Question 3

the expenses associated with the materials used to make a product, including the cost of freight

Answer 3

Raw materials costs

Question 4

are the wages and benefits provided to the workers

Answer 4

Direct labor costs

Question 5

are the costs to keep the business running, including wages and benefits for workers who do not directly produce the products, such as office clerks or managers, building and equipment expenses, and factory supplies.

Answer 5

Factory overhead costs

Question 6

of a manufacturer is the sum of the raw materials and direct labor costs.

Answer 6

Prime Cost

Question 7

is the difference between selling price (SP) and variable cost (VC). This difference goes first to pay off total fixed costs (FC); when they are covered, profit ( or losses ) start to accumulate.

Answer 7

Contribution Margin (CM

Question 8

Is the point at which the seller has covered all expenses and costs of a unit and has not made any profit or suffered any loss.

Answer 8

The Break-even Point (BE)

Question 9

Cost is the change in total production cost that comes from making or producing one additional unit

Answer 9

Marginal Cost

Question 10

When sales exceed the break-even point,

Answer 10

is a profit.

Question 11

When sales are less than the break-even point

Answer 11

is a loss.