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By: amicevdv • 1 month ago
Some examples from this set of practice questions
1.
Define the opportunity cost
Answer: the economic value of the best forgone alternative. Can look at the cash flow that each of the alternatives can generate.
2.
What is the Contribution margin?
Answer: the difference between revenues and variable costs.
3.
Break-even = the minimum amount of units sold in order to make a 2x profit. True or false?
Answer: False! Break-even = the minimum amount of units sold in order to make a 0$ profit.
4.
What is the Indifference point?
Answer: The indifference point is the level of volume at which total costs, and hence profits, are the same under both cost structures.
5.
What is the Straight-line depreciation method?
Answer: the asset loses the same amount of value each year of its life
6.
Explain the Death spiral
Answer: when using actual volume products as the denominator. If volume drops, fixed costs per unit increase. To maintain the same profitability level, selling price must be increased, but then volume lowers. This repeats itself in the death spiral.
7.
What 2 main roles does MAS have?
Answer: 1. Reducing agency costs (associated with the separation of ownership & control) 2. Facilitating decision
8.
Give examples of conversion costs
Answer: labor, equipment, facilities
9.
Cash flow statement Direct method = lists the cash inflows and outflows for that period. True or false?
Answer: True!
10.
Define Overhead costs
Answer: resources that are not material or direct labor (often indirect costs).
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