Q1When the revenue per unit increases but the variable cost per unit stills the

Question

Q1When the revenue per unit increases but the variable cost per unit stills the same, then:

a.The breakeven point moves to the left.

b.The number of units to break even units increases.

c.The breakeven point moves to the right.

d.The breakeven point stays in the same place.

Q2 Based on the data below, the economic service life (ESL) of the asset is equal to:

a.2 years

b.3 years

c.4 years

d.5 years

Years Retained AW of First Cost AW of Operating Cost AW of Salvage Value 95,000.00 36,000.00 17,500.00 5,800.00 2,700.00 175,000.00 96,000.00 -70,000.00 -57,000.00 -48,000.00 -45,000.00 -45,000.00 35,000.00 35,000.00 -43,000.00 2 4 5

Explanation / Answer

1) The revenue per unit implies the price or the average revenue and the variable cost per unit implies AVC. Hence, when revenue per unit increases but the variable cost per unit stills the same, it means AVC is at its minimum and P is greater than AVC. So breakeven which is TR = TC, moves to the right.

So the correct option is C

2) The difference between the total annual worth of cost and annual worth of benefit is least for 4th year, Hence he economic service life (ESL) of the asset is equal to 4 years. So the answer is C.

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