Question

7. Despite Break-even analysis is a useful tool to find out the break-even point, it has a number of assumptions. Which of the following is incorrect? Course teacher: Steve Lam Course Assessment 3 A Total costs and total revenues do not have linear functions of output B Assuming costs can be classified into either fixed or variable elements C The analysis only considers the decision at the relevant range D Volume is the only factor affecting costs, and all other factors remain constant 8. When an NPO considers the financial planning exercise, it takes into account of the following in the planning process. Which statement is incorrect? A To forecast and consider all unexpected consequences that will not lead to a surprise situation B To find out the "best" plan for the organization under a static process C To determine which alternatives to undertake D To measure performance against the plan 9. When developing the budget, management has to determine some specific policy decisions beforehand. Which statement is correct? A B C D To make sure the budget is to be set on some measurable and predicable information and data To decide whether the budget must achieve a surplus one To fix the budget time-line after the start of various activities To adjust the budget immediately when there is any change throughout the year 10. In a system of budgetary planning and control, the control processes that form the key elements are: A Developing plans to achieve objectives B Communicating information about proposed plans C Motivating people to build budgetary slack D Reporting the actual performance against budget Which of the above statement is incorrect? 11. The budgetary control report is very useful in budgetary control system. Which of the following statement is incorrect? A The control report covers both operating and cash budgets. B The report shows the variances of actual results against budget plan The report handles significant variances by highlighting those areas that need to be addressed to. D The content of report should be comprehensive so that it could include all areas that the recipients of the report can take action without delay. 12. One of the important assumptions in break-even analysis is that it applies only to the relevant range. Which one of the following statement is incorrect? A B The relevant range is cut at the straight line when a curvilinear cost curve is used, The relevant range has a straight line closely shows and approximates a curvilinear variable cost line C When we draw any cost curve, the relevant range must be appeared along the curve. D The relevant range is the range of activity that holds predictions and estimates to be valid for annlysis 13. The practical application of break-even analysis can be found in the following statements. Which one is incorrect? A We normally include main service fee and other income in the decision. B We have to identify and split between variable costs and fixed costs for calculation. C We may use Contribution/Sales ratio when unit cost is unavailable. We may make use of gross surplus margin together with fixed costs to find out the break- even area. D 14. In the financial planning process, financial sustainability is one of the key areas to be addressed. Which one of the following statement is correct? A Financial sustainability is part of the operational strategy and process. B Financial sustainability is concerned with how to beat the surplus C Financial sustainability requires some action plans to be implemented at each stage. D Financial sustainability does not require to draw financial resources during its planning stage. 15. When preparing a budget, there are a number of preliminary jobs to be done beforehand. Which one is incorrect? A B C D The understanding of budgeting area in terms of its income and expenditure is very important. The budgeting period to be covered for. Focus on how to achieve surplus in the first place. Pay attention to certain known facts that would influence the budgetary result.

Answer 1

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A is incorrect - In breakeven analysis, cost and revenue functions are assumed to be linear

B is correct - This is an assumption of breakeven analysis

C is correct - This is an assumption of breakeven analysis

D is correct - Variable costs are assumed to change linearly with volume, whereas fixed costs remain constant. Volume is the only factor affecting costs, and other factors are assumed to remain unchanged.