MGSC 395 EXAM 1 TIMOTHY FRY
QUESTIONS AND ANSWERS GRADED A+
2025/2026
Break Even Analysis - ANS Analysis to compare processes by finding the volume at which two
different processes have equal total costs.
pQ = F + cQ
Break Even Quantity - ANS The volume at which total revenues equal total costs.
Variables for Break Even - ANS Variable cost (c)
The portion of the total cost that varies directly with volume of output.
Fixed cost (F)
The portion of the total cost that remains constant regardless of changes in levels of output.
Quantity (Q)
The number of customers served or units produced per year.
Total cost equation - ANS Total cost = F + cQ
Total Revenue Equation - ANS Total revenue = pQ
Quantity Equation - ANS Q= F/(p-c)
1 @COPYRIGHT 2026 ALLRIGHTS RESERVED.
, A hospital is considering a new procedure to be offered at $200 per patient. The fixed cost per
year would be $100,000 with total variable costs of $100 per patient. What is the break-even
quantity for this service? Use both algebraic and graphic approaches to get the answer. -
ANS 1000 patients
variables for buy/make options - ANS F sub b
The fixed cost (per year) of the buy option
F sub m
The fixed cost of the make option
c sub b
The variable cost (per unit) of the buy option
c sub m
The variable cost of the make option
total costs to make/buy - ANS -Total cost to buy
Fb + cbQ
-Total cost to make
Fm + cmQ
Q= (Fm-Fb)/(cb-cm)
A fast-food restaurant featuring hamburgers is adding salads to the menu
The price to the customer will be the same
Fixed costs are estimated at $12,000 and variable costs totaling $1.50 per salad
Preassembled salads could be purchased from a local supplier at $2.00 per salad
Preassembled salads would require additional refrigeration with an annual fixed cost of $2,400
Expected demand is 25,000 salads per year
What is the break-even quantity? - ANS (12000-2400)/(2-1.50)=19200 salads
2 @COPYRIGHT 2026 ALLRIGHTS RESERVED.
QUESTIONS AND ANSWERS GRADED A+
2025/2026
Break Even Analysis - ANS Analysis to compare processes by finding the volume at which two
different processes have equal total costs.
pQ = F + cQ
Break Even Quantity - ANS The volume at which total revenues equal total costs.
Variables for Break Even - ANS Variable cost (c)
The portion of the total cost that varies directly with volume of output.
Fixed cost (F)
The portion of the total cost that remains constant regardless of changes in levels of output.
Quantity (Q)
The number of customers served or units produced per year.
Total cost equation - ANS Total cost = F + cQ
Total Revenue Equation - ANS Total revenue = pQ
Quantity Equation - ANS Q= F/(p-c)
1 @COPYRIGHT 2026 ALLRIGHTS RESERVED.
, A hospital is considering a new procedure to be offered at $200 per patient. The fixed cost per
year would be $100,000 with total variable costs of $100 per patient. What is the break-even
quantity for this service? Use both algebraic and graphic approaches to get the answer. -
ANS 1000 patients
variables for buy/make options - ANS F sub b
The fixed cost (per year) of the buy option
F sub m
The fixed cost of the make option
c sub b
The variable cost (per unit) of the buy option
c sub m
The variable cost of the make option
total costs to make/buy - ANS -Total cost to buy
Fb + cbQ
-Total cost to make
Fm + cmQ
Q= (Fm-Fb)/(cb-cm)
A fast-food restaurant featuring hamburgers is adding salads to the menu
The price to the customer will be the same
Fixed costs are estimated at $12,000 and variable costs totaling $1.50 per salad
Preassembled salads could be purchased from a local supplier at $2.00 per salad
Preassembled salads would require additional refrigeration with an annual fixed cost of $2,400
Expected demand is 25,000 salads per year
What is the break-even quantity? - ANS (12000-2400)/(2-1.50)=19200 salads
2 @COPYRIGHT 2026 ALLRIGHTS RESERVED.
