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194) Total revenue is
A) the profit made from selling a product or service.
B) the net gain in sales if the unit price is lowered.
C) the least number of units sold needed to cover product, distribution, and promotional costs.
D) the amount at which marginal costs exceed fixed costs.
E) the total money received from the sale of a product.
195) SHAPE magazine is targeted at young women seeking healthier lifestyles. At a price of $3.00
per copy, 1.25 million copies are sold. If the price per issue is increased to $3.25, only 1 million
copies would be sold. Fixed costs are $1 million and unit variable costs are $0.50 per magazine.
From the information provided here, what is SHAPE magazine's total revenue obtained at the
lower $3.00 price?
A) $3,750,000
B) $3,250,000
C) $2,125,000
D) $1,750,000
E) $3,000,000
196) Forever Quilting is a small company that makes quilting kits priced at $120 each. There is no
quantity discount. The costs of the materials that go into each kit total $45. It costs $5 in labor to
assemble a kit. The company has monthly expenses of $1,000 for rent and insurance, $200 for heat
and electricity, $500 for advertising, and $4,500 for the monthly salary of its owner. Last month
the company sold 150 kits. Forever Quilting's total revenue for the month was
A) $4,300.
B) $6,200.
C) $7,500.
D) $10,500.
E) $18,000.
197) Four cost concepts are important in pricing decisions: total cost, variable cost, unit variable
cost, and
A) dividend cost.
B) liquidity cost.
C) discretionary cost.
D) fixed cost.
E) elastic cost.
198) The total expense incurred by a firm in producing and marketing a product, which equals the
sum of fixed cost and variable cost, is referred to as
A) overhead cost.
B) total cost.
C) unit cost.
D) average cost.
E) marginal cost.
199) Total cost is
A) the sum of the expenses of the firm that are stable and do not change with the quantity of a
product that is produced and sold.
B) the change in expenses that results from producing and marketing one additional unit of a
product.
C) the average amount of money received for selling one unit of a product or simply the price of
that unit.
D) the sum of the expenses of the firm that vary directly with the quantity of a product that is
produced and sold.
E) the total expense incurred by a firm in producing and marketing a product, which equals the
sum of fixed cost and variable cost.
200) Fixed cost is
A) the sum of the expenses of the firm that vary directly with the quantity of a product that is
produced and sold.
B) the total expense incurred by a firm in producing and marketing a product, which equals the
sum of overhead cost and variable cost.
C) the sum of the expenses of the firm that are stable and do not change with the quantity of a
product that is produced and sold.
D) the average amount of money received for selling one unit of a product or simply the price of
that unit.
E) the change in expenses that results from producing and marketing one additional unit of a
product.
201) The sum of the expenses of a firm that is stable and does not change with the quantity of the
product that is produced and sold is referred to as
A) fixed cost.
B) total cost.
C) variable cost.
D) marginal cost.
E) overhead cost.
202) Rent, executive salaries, and insurance are typical examples of
A) variable costs.
B) fixed costs.
C) unit costs.
D) marginal costs.
E) total costs.
203) Which of the following is a typical example of a fixed cost?
A) taxes
B) raw materials
C) sales commissions
D) executive salaries
E) hourly wages
204) Which of the following would be an example of a fixed cost for a company that makes carbon
monoxide monitoring systems for workers to wear in hazardous areas?
A) the lithium batteries that are used in each monitor
B) the chest harness used to wear the monitor
C) the insurance for the company's factory
D) the free training videos that are sent to each new customer
E) the stainless-steel, water-resistant cases in which the monitors are stored
205) Variable cost is
A) the sum of the expenses of the firm that are stable and do not change with the quantity of a
product that is produced and sold.
B) the sum of the expenses of the firm that change with the quantity of a product that is produced
and sold.
C) the total expense incurred by a firm in producing and marketing a product, which equals the
sum of fixed cost and marginal cost.
D) the average amount of money received for selling one unit of a product or simply the price of
that unit.
E) the change in total cost that results from producing and marketing one additional unit of a
product.
206) The sum of the firm's expenses that change with the quantity of the product that is produced
and sold is referred to as
A) fixed cost.
B) total cost.
C) marginal cost.
D) unit cost.
E) variable cost.
207) Which of the following is a typical example of a variable cost?
A) shipping costs
B) rent on a building
C) executive salaries
D) insurance premiums
E) leases on delivery trucks
208) Unit variable cost refers to variable cost expressed
A) as the sum of all units sold.
B) on a per unit basis for a product.
C) as a percentage of total sales.
D) as a percentage of fixed costs.
E) as a percentage of total costs.
209) The unit variable cost (UVC) equals variable cost (VC) divided by
A) quantity (Q).
B) fixed costs (FC).
C) total cost (TC).
D) total revenue (TR).
E) price per unit of the product (P).
210) Forever Quilting makes quilting kits priced at $120. The costs of the materials that go into
each kit total $45. It costs $5 in labor to assemble a kit. The company has monthly expenses of
$1,000 for rent and insurance, $200 for heat and electricity, $500 for advertising, and $4,500 for
the monthly salary of its owner. Forever Quilting's unit variable cost for its kits is
A) $5.
B) $45.
C) $50.
D) $120.
E) $170.
211) Break-even analysis is
A) a process that investigates the difference between marginal revenue and marginal cost.
B) a method of determining just how much a consumer is willing to pay for a product or service.
C) a technique that analyzes the relationship between total revenue and total cost to determine
profitability at various levels of output.
D) the process of determining the quantity of product consumers will buy relative to the quantity
produced by the firm.
E) the graph that shows the maximum number of products consumers will buy at a given price.
212) A technique that analyzes the relationship between total revenue and total cost to determine
profitability at various levels of output is referred to as
A) break-even analysis.
B) marginal analysis.
C) sensitivity analysis.
D) market analysis.
E) tipping point analysis.
213) The quantity at which total revenue and total cost are equal is referred to as
A) the tipping point.
B) the profitability point.
C) incremental return on investment.
D) the break-even point.
E) sustainability.
214) The break-even point (BEP) = [Fixed cost ÷ (Unit price − ________)].
A) Total cost
B) Total expense
C) Marginal revenue
D) Unit variable cost
E) Total number of units produced or quantity
215) The break-even point (BEP) = [________ ÷ (Unit price − Unit variable cost)].
A) Total cost
B) Total expense
C) Fixed cost
D) Unit variable cost
E) Total number of units produced or quantity
216) The break-even point (BEP) = [Fixed cost ÷ (________ − Unit variable cost)].
A) Total cost
B) Total expense
C) Fixed cost
D) Unit variable cost
E) Unit price
217) The owner of a small restaurant that sells takeout fried chicken and biscuits each month pays
$2,500 in rent, $500 in utilities, $750 interest on his loan, insurance premium of $200, and $250 on
advertising on local buses. A bucket of chicken is priced at $9.50. Unit variable costs for the
bucket of chicken are $5.50. How many buckets of chicken does the restaurant need to sell to break
even each month?
A) 442 buckets
B) 764 buckets
C) 1,050 buckets
D) 3,150 buckets
E) 4,200 buckets
218) Each month, the owner of a car wash pays $2,500 in rent, $500 in utilities, $750 interest on
the business loan, an insurance premium of $200, and $250 on advertising on local bus routes. A
full-service car wash is priced at $10.50. Unit variable costs for the car wash are $7.50. At what
level of revenue will the car wash break even?
A) $4,200
B) $10,500
C) $14,700
D) $30,000
E) $39,900
219) You are selling a new line of t-shirts on the boardwalk. The selling price will be $25 per shirt.
The labor cost is $5 per shirt. The administrative costs of operating the company are estimated to
be $60,000 annually and the sales and marketing expenses are $20,000 a year. Additionally, the
cost of materials will be $10 per shirt. What is the break-even quantity?
A) 2,000 shirts
B) 3,200 shirts
C) 5,334 shirts
D) 8,000 shirts
E) 16,000 shirts
220) Tim Marlow, the owner of The Clock Works, wanted to know how many clocks he must sell
in order to cover his fixed cost at a given price. Marlow knew that he had total fixed costs of
$20,000 for equipment, taxes, and a bank loan. He also had a unit variable cost of $20 per clock for
labor and materials. If the price Marlow charges for each of his clocks is $40, what is his
break-even point quantity?
A) 100 clocks
B) 334 clocks
C) 500 clocks
D) 1,000 clocks
E) 10,000 clocks
221) Ampro-Mag makes materials for safely controlling hazardous spills of all kinds. It sells these
items as a neutralizing kit priced at $100. The costs of the materials that go into each kit are $45. It
costs $5 in labor to assemble a kit. The company has monthly expenses of $1,000 for rent and
insurance, $200 for heat and electricity, $500 for advertising in trade journals, and $3,500 for the
monthly salary of its owner. What is Ampro-Mag's monthly break-even point in terms of number
of neutralizing kits sold?
A) 40 kits
B) 52 kits
C) 104 kits
D) 116 kits
E) 520 kits
Figure 11-6
222) The owner of a picture frame store has generated a spreadsheet of several calculations based
on different quantity, price, revenue, cost, and profit scenarios shown in Figure 11-6 above. What
is the break-even point quantity for her picture frame store?
A) 0
B) 400
C) 800
D) 1,200
E) 2,000
223) The owner of a picture frame store has generated a spreadsheet of several calculations based
on different quantity, price, revenue, cost, and profit scenarios shown in Figure 11-6 above. Of the
following options, at what sales level is profit maximized?
A) 0
B) 400
C) 800
D) 1,600
E) 2,000
224) A graphic presentation of the break-even analysis that shows the intersection of total revenue
and total cost to identify profit or loss for a given quantity sold is referred to as a
A) Gantt chart.
B) demand curve.
C) ROI analysis.
D) cross-tabulation.
E) break-even chart.
225) A break-even chart is a graphic presentation
A) that shows the maximum number of units that will be sold at a certain price.
B) of a break-even analysis that shows where total revenue and total cost intersect to identify profit
or loss for a given quantity sold.
C) that relates variable costs in terms of product or service substitutes in order to determine which
items or services would least affect total revenues.
D) that relates profits and revenues versus total costs in order to determine the time frame in which
a company could achieve profitability.
E) is a form of scatter graph used to identify specific activities or items that are creating the
greatest return on investment.
Figure 11-7
226) Figure 11-7 above depicts a
A) Gantt chart.
B) demand curve.
C) break-even chart.
D) ROI analysis.
E) cross-tabulation.
227) Suppose you are the owner of a picture frame store. Assume that the average price customers
are willing to pay for each picture frame is $120. Also, suppose your fixed costs (FC) total $32,000
(real estate taxes, interest on a bank loan, etc.) and unit variable cost (UVC) for a picture frame is
$40 (labor, glass, frame, and matting). Figure 11-7a above shows that by selling 200 pictures, your
picture frame store will
A) break even.
B) earn a profit.
C) incur a loss.
D) have no fixed costs.
E) have no variable costs.
228) Suppose you are the owner of a picture frame store. Assume that the average price customers
are willing to pay for each picture frame is $120. Also, suppose your fixed costs (FC) total $32,000
(real estate taxes, interest on a bank loan, etc.) and unit variable cost (UVC) for a picture frame is
$40 (labor, glass, frame, and matting). According to Figure 11-7a above, how much profit will
your picture frame store make if it sells 400 picture frames?
A) $48,000
B) $32,000
C) $16,000
D) $0
E) $64,000
229) Suppose you are the owner of a picture frame store. Let's assume that the average price
customers are willing to pay for each picture frame is $120. Also, suppose your fixed costs (FC)
total $32,000 (real estate taxes, interest on a bank loan, etc.) and unit variable cost (UVC) for a
picture frame is $40 (labor, glass, frame, and matting). Figure 11-7a above shows that by selling
800 picture frames, you will
A) break even.
B) earn a profit.
C) incur a loss.
D) have no fixed costs.
E) have no variable costs.
