QUESTION 1 Match each operating cost with either fixed cost (if the description

Question

QUESTION 1 Match each operating cost with either fixed cost (if the description indicates it's fixed) or variable cost (if the description indicates it's variable) A. Variable cost B. Fixed cost Parts or materials used in each unit of the product insurance premiums on the company headquarters. An instant rebate offered to newc The salaries of the firm's accountants (who are all full-time employees) QUESTION 2 While financial and cash flow breakeven measures must account for taxes, accounting breakeven does not. Why? A firm with no profit or loss doesn't owe taxes or receive tax credits. Financial and cash flow breakeven measures are wrong Breakeven analysis isn't concerned with taxes. Accounting breakeven is wrong QUESTION 3 True or false, a firm that invests in lots of fixed assets instead of labor is likely to have high "venture leverage". True False QUESTION 4 The difference between EBITDA and EBDAT is how taxes are calculated whic one is not a measure of cash flow, while the other is whether interest expense is accounted for h revenues are included QUESTION 5 If revenue is 1355 and variables costs are 276, what is the contribution margin?

Explanation / Answer

1. a) Parts or material used in each unit of the product = Variable Cost
Variable cost depends on the production volume and is constant per unit produced. The cost increases with the increase in unit volume produced.
   b) Insurance premiums on the company headquarter = Fixed Cost
It is a charge or expense on the company on a constant basis and remains the same inspite of change in the company's production
   c) An instant rebate offered to the new customer : Variable cost
    This might be a one time cost to the customer and hence is not a constant liability to the company
d) Salaries of the firm's accountant ( who are full time employees) : Fixed Cost
   This is a fixed cost to the employee which the company has to bear and is not dependent on the production volume. It remains constant for a full time employee over a period.

2. Option c
Breakeven analysis isnt concerned with taxes.
Breakeven analysis looks at the point where fixed and variable cost of the company is just covered from revenue. Since taxes are calculated on income and zero income would result in zero taxes, thus breakeven analysis would not include tax calculation.


3. A firm thant invests in a lot of fixed assets instead of labor is likely to have high "venture leverage"

True

This is because investment on labor is relatively cheaper as we can adjust the wages by adjusting the number of labora nad work hours. However, investment in fixed asset is a long term investment and is accounted for a long period at high rate which cannot be adjusted once invested. Hence, this result in high venture leverage.

4. Difference between EBITDA and EBDAT is whether interest expense is accounted for

EBITDA = Earnings before interest tax depreciation and amortization whereas EBDAT is earnings before tax depreciation and amortization.
Thus, there is a difference in the calculation in that interest expense is not accounted for in EBDAT.

5. Contribution margin = Revenue - Variable cost
= 1355 - 276
      = $1079 Answer

6. An asset or liability that is "current" becomes or requires cash within one year. Option c

Current assets or liabilities are short term investments or liabiities of the company which is accounted for a period less than 1 year.

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.