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    29 Costs: Multiple-Choice Questions

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    Leslie Clarissa
    This document contains a series of multiple choice questions about costs and break-even analysis for business. There are 10 questions total that cover topics like fixed vs variable costs, contribution margin, break-even point, and margin of safety based on cost and revenue data presented for different business scenarios.

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    29 Costs: Multiple-Choice Questions

    Uploaded by

    Leslie Clarissa
    98 views3 pages
    This document contains a series of multiple choice questions about costs and break-even analysis for business. There are 10 questions total that cover topics like fixed vs variable costs, contribution margin, break-even point, and margin of safety based on cost and revenue data presented for different business scenarios.

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    This document contains a series of multiple choice questions about costs and break-even analysis for business. There are 10 questions total that cover topics like fixed vs variable costs, contribution margin, break-even point, and margin of safety based on cost and revenue data presented for different business scenarios.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    98 views3 pages

    29 Costs: Multiple-Choice Questions

    Uploaded by

    Leslie Clarissa
    This document contains a series of multiple choice questions about costs and break-even analysis for business. There are 10 questions total that cover topics like fixed vs variable costs, contribution margin, break-even point, and margin of safety based on cost and revenue data presented for different business scenarios.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    Cambridge International AS and A Level Business

    29 Costs
    Multiple-choice questions
    1 An indirect cost is one that:

    a can be clearly identified as arising from the production of a particular product

    b does not change with the level of output

    c is variable

    d cannot be identified with a unit of production

    2 The finance manager at a major electronics retailer was pleased that over the
    last 12 months interest rates had fallen on six separate occasions, leading to a
    reduction in the cost of borrowing for the variable-rate loan the firm had.
    In this example loan interest is best classified as:

    a a fixed cost

    b a variable cost

    c a marginal cost of production

    d contribution cost

    Questions 3–4 are based on the following cost information for a firm with a maximum output level of
    30 units per week.

    Output per week Total variable cost ($) Total cost ($)
    0 200
    10 100
    20 190
    30 260

    3 What is the total fixed cost of the business?

    a $460

    b $100

    c $200

    d It is not possible to calculate.

    4 What is the marginal (additional) cost as output increases from 10 to 20 units?

    a $90

    b $190

    c $9.50

    d $9

    © Cambridge University Press 2014  Cambridge International AS and A Level Business Multiple-choice questions – Chapter 29 1
    Cambridge International AS and A Level Business

    Questions 5–7 relate to the following cost and revenue data for a toy manufacturer.

    material costs $0.60 per unit


    direct labour costs $0.40 per unit
    average fixed cost at full capacity $1
    selling price $3
    full capacity is 10,000 units per month
    current level of production 6,000 units per month

    5 The break-even level of output is:

    a 5,000 units

    b 3,000 units

    c 10,000 units

    d 0.5 units

    6 The current margin of safety is:

    a 100%

    b 20%

    c 500 units

    d 5,500 units

    7 A toy retailer offers to pay $1.90 per unit to purchase 2,000 units.
    The unit contribution is:

    a -$0.10

    b $1.00

    c $1.40

    d $0.90

    8 Which one of the following statements about break-even analysis is false?

    a It assumes that all units produced are sold.

    b It assumes that costs and revenue are linear.

    c It assumes that costs can be classified as either fixed or variable.

    d It does not identify profit/loss at different levels of output.

    Questions 9 and 10 are based on the following information:


    A mobile ice-cream vendor sells 500 ice-creams each day for $2 each. The direct cost of making each ice
    cream is $0.35. The average fixed cost per ice cream at this level of daily sales is $0.60.

    9 The difference between daily contribution and daily profit is:

    a $165

    b $300

    c $525

    d $1,000

    © Cambridge University Press 2014  Cambridge International AS and A Level Business Multiple-choice questions – Chapter 29 2
    Cambridge International AS and A Level Business

    10 If fixed costs now rise to $660 per day, the break-even level of daily ice cream sales becomes:

    a 300

    b 400

    c 560

    d 650

    © Cambridge University Press 2014  Cambridge International AS and A Level Business Multiple-choice questions – Chapter 29 3

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