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ASSIGNMENTS

Choose the correct answer.
1 A firm sells 10 units at £5 each. Its total costs are £30. How much profit is
made?
a) £50 profit is made;
b) £20 profit is made;
c) £20 loss is made.
2 When does the break-even point fall?
a) when costs go up;
b) when costs go down;
c) when costs change.
3 If the average variable costs £10, average selling price is £25 and fixed costs
are £60,000, then what is the break-even output?
a) 4,000;
b) 5,000;
c) 6,000.
4 How do you calculate total revenue?
a) quantity sold x average price;
b) quantity sold x average cost;
c) quantity sold x average profit.
5 If a company reduces a product's price, what does this mean for their
revenue?
a) there will be an increase in revenue;
b) there could be an increase or decrease in revenue;
c) there will be an decrease in revenue.

Is it true or false?
1 Fixed Expenses do not change in total when there is a modest change in
sales.
2 Property taxes and rent are often fixed expenses.
3 Variable expenses change in total as volume changes.
4 Break-even point is the point where revenues equal the total of all expenses
including the cost of goods sold.
5 If a company requires a profit of $30,000 (instead of breaking even), the
$30,000 should be combined with the fixed expenses in order to compute the point at
which the company will earn $30,000.
6 Decreasing a company's fixed expenses should reduce the break-even point.

Answer the following questions.
1 What type of costs do you know?
2 What is the difference between fixed and variable costs?
3 If a company reduces a product's price, what does this mean for their
revenue?
4 What is a business doing at the break-even point?
5 What is the difference between revenue and profit?

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